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How to resolve a partnership dispute

On Behalf of | Sep 7, 2022 | Business Litigation

A business partnership can be a great idea for those seeking to grow their enterprises while sharing some of the responsibilities that come with business ownership. However, it can also be a source of trouble if one or some of the partners fail to live up to their obligations. 

A breach of partnership agreement or contract happens when one or more partners fail to live up to their end of the deal. If this happens, it helps to know the options you can explore to safeguard your rights and interests.

A partnership agreement is a binding document

A partnership contract is a binding document that outlines each partner’s obligations to the business and each other. It also dictates how the business will be formed and run. As such, the party that fails to fulfill their obligations in the partnership agreement can be held liable for the resulting damages through a breach of contract lawsuit.

Your options when a partner breaches the business contract

Your course of action following the breach of a business partnership will largely depend on the nature of damages attributable to the breach. Here are three options you can consider when a partner fails to live up to their obligation to the partnership contract.

  • Mediation – If the breach is unintentional, then the parties in the partnership may consider mediation as a tool for repairing the resulting damages. Done successfully, this can preserve the partnership and get the parties involved back on the same page.
  • Litigation – If the breach is so severe as to result in damages, then you might consider taking legal action against the responsible party. Depending on the circumstances, the lawsuit may require that the breaching party pay for the resulting damages.
  • End of business relationship – In extreme circumstances (like fraud), a breach of the partnership agreement could mean the end of the business relationship. When this happens, the other partners may resolve to expel the breaching party or dissolve the partnership altogether.

If you have worked hard to build a business, you have a duty to protect your investment. Knowing your rights and obligations in a business partnership can help safeguard your interests while handling a dispute.