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What if your business partner violates your agreement?

On Behalf of | Aug 23, 2021 | Business Litigation |

Getting into a business partnership can be exciting. It can also be a stressful experience when one partner is not living up to the terms of the partnership agreement. When a partner fails to honor their end of the partnership agreement, this is known as breach of contract or breach of the agreement.

A business partnership comes with its share of merits and demerits. When a partner violates the partnership agreement, it is important that you respond in an appropriate manner. Before taking any action, however, you should understand the options at your disposal

Here are potential options you might want to explore when your business partner violates the partnership agreement:

Give dialogue a chance

If your partner is generally sensible, dragging them to court over breach of partnership may worsen an already bad situation. The court process can potentially take months or even years to conclude. Rather, consider having a straight talk with them to establish the circumstances surrounding their actions and how this issue can be resolved. Trying to talk things out will go a long way in demonstrating your desire to resolve the issue with your relationship intact.

Terminate the partnership

If dialogue fails to resolve the matter, you may consider dissolving the partnership. However, before taking this route, be sure to refer to your business’ bylaws to understand the implications of this move. If you are in a limited liability partnership, you will have to refer to the specific procedures outlined in your bylaws. Even if you are in another type of corporation, you will still need to give your partner time to fix the breach before the contract can be rendered null and void. 

It is not unusual for business partners to get into a disagreement. However, a breach of a business contract can feel like a betrayal. How you respond to a breach largely depends on the nature of the partnership, the severity of the breach and the available resolution options.