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Remedies when business partner breaches partnership contract

On Behalf of | Nov 16, 2022 | Business Law

When getting into a business partnership, it is important that you create and sign a formal partnership agreement. The primary purpose of this binding agreement is to specify each party’s obligations and outline what should happen in the event of a disagreement.

Disputes among business partners are not uncommon. While some disputes can be fixed through dialogue, others can put a serious strain on the partnership. Depending on the nature of the breach, a violation of a partnership agreement can trigger different kinds of reactions.

A partnership agreement is binding

For starters, a partnership contract is a legal contract. And just like with any other legal document, you have the following remedies when responding to a breach of the partnership contract.

Settle the matter through negotiation

Most partnership contracts come with conflict resolution mechanisms. Through formal mediation or informal negotiation, you and your partners can address the breach and reach a settlement. If all go well, you may salvage the partnership.

Sue the breaching party

If the violation results in losses to the business, then you might sue the breaching party for the resulting damages. Violations that might lead to lawsuits include theft of the business’ property, fraud against the business, its clients or suppliers and conflict of interest.

Expel the breaching party from the partnership

Some violations may spell the end of the business partnership. In this case, the breaching party might be expelled from the business. This is usually the case if there were two parties in the partnership. Alongside the expulsion, the breaching party might also be held liable for the damages resulting from the dissolution.

Done right, a business partnership can result in enormous benefits. A breach, on the other hand, can hurt everyone involved. Find out how you can safeguard your rights and interests while addressing a breach of the partnership agreement.