Hi there.
Duplicate content = problems. That's for sure. If website does get penalized, it would be the website, which will be considered scraper by Google. In your case (if your current website is indexed, ranking and don't have any penalties) it would be your partners. So, in theory you can bring a penalization to your partner 
Or if sales increase as much as we think they might, would it be worth a penalty as our current rankings aren’t great?
Penalty is never good. It might seem ok in the beginning, but when you get hit, you gonna get screwed.
Now, my suggestion would be to go with partnership and give them a "copy" of your website, but put canonical links to every single page, linking back to your original one. Then it'll be win-win combination. Just make sure it's one of required and clear conditions to your partner.
Cheers.
