Your business partner failing to fulfill any obligation included in the partnership agreement could be considered a breach of contract. For example, if they fail to perform their duties, act in their own self-interest, make unauthorized withdrawals of partnership funds, commit a criminal act, such as fraud or theft or leave the business without fulfilling their duties (abandonment).
It’s crucial to approach a breach of your partnership agreement from the right angle to protect the business. Here are three options to consider:
1. Negotiate a settlement
If a breach can be settled using the conflict resolution strategies included in your agreement, you and your business partner should consider doing so. This is because it saves time and money.
You and your business partner should openly communicate about the specific clauses in your agreement that were breached, the damages the breach caused and how to move forward.
Examples of solutions you can implement include your business partner paying for losses they caused using personal assets, adjusting their responsibilities while complying with your agreement and modifying the contract altogether.
2. File a lawsuit
If your business partner’s actions harm the business considerably or negotiating a settlement fails, you can take them to court to be compensated for the damages the business incurred. Filing a lawsuit may or may not be a good option, depending on the circumstances surrounding the case.
3. Expulsion
If your partnership agreement includes an expulsion clause, you can remove your partner from the partnership if their actions created grounds for an expulsion. You can expel your partner and still file a lawsuit against them.
You need to be extra careful about this option. You must expel the partner in good faith while observing your contract. Otherwise, they might have grounds to sue you.
Your business partner breaching the partnership contract can lead to significant losses. Legal guidance can help you determine the most suitable option for your case.