When you and your partner joined forces in business, you may have had many hopeful plans for the future. The idea for the business may have germinated from a casual conversation with a friend about your mutual strengths and interests, or you may have sought out someone who could support your goals financially and creatively.
Perhaps you had the foresight to draft and sign a partnership agreement that provides options for a variety of situations facing your company. On the other hand, you may have shaken hands over an oral agreement. Awkward as it may have been to consider at the time, you can now refer to that agreement in light of the difficulties you are experiencing with your partner.
Examining your options
If you are in the unpleasant position of learning that your business partner has breached the terms of your agreement, you may have some tough choices to make. Your partnership agreement may have specific remedies for this type of situation, or you may have left the contract vague about the consequences of a breach. The latter being the case, you will have to consider the factors involved in the breach. You must also think about the ramifications of each action you may take, including these options:
- Filing a lawsuit against your partner may allow you to seek compensation for any damages he or she caused by breaching the contract, such as walking away from the business and forcing the dissolution of the partnership.
- If your partner's breach involved fraud, embezzlement or other misappropriation of business funds, you may wish to take legal action to recoup these losses.
- If your partnership agreement includes language related to liquidated damages, you may wish to consider the advantages and disadvantages of enforcing that clause.
- Depending on the language in your agreement, you may have the option of expelling your partner, which may mean dissolving the partnership or reforming it with other partners.
The circumstances of your business and the breach of contract may allow you and your partner to negotiate a settlement rather than use your company's time and resources in a prolonged litigation. In either case, you will certainly want every advantage for minimizing your personal and professional damages during this process. You may find it wise to seek the advice of an attorney who is skilled at effectively handling a variety of partnership disputes.