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2 ways to handle a serious breach of your partnership

On Behalf of | Sep 1, 2022 | Partnerships & Corporations

Getting into a business partnership with other people or entities can be a very exciting undertaking. However, it can also lead to a stressful situation when one or more partners deviate from the terms of the agreement. 

Ideally, most partnerships are founded on an agreement that is negotiated and agreed upon by the parties involved. Thus, if one or more partners fail to abide by the terms of the contract, then such parties are deemed to have breached the partnership agreement. Subject to the severity of the breach, here are two actions you can take when a partner fails to live up to their end of the bargain. 

Expel the partner, per your agreement

Sometimes, a partner may irreparably violate the partnership contract. If this happens, you may consider removing them from the partnership. The partnership agreement should have included provisions that may trigger an expulsion. 

Behaviors that may trigger an expulsion of a partner include fraud, theft or engaging in activities that amount to a conflict of interest. 

Sue the partner for breach of contract

A party can breach the partnership agreement in a number of ways. When that breach results in a loss or damages, then you may consider suing the partner in question for damages. 

This is particularly important if the partnership agreement includes a clause that requires the breaching party to pay liquidated damages. However, liquidated damages are only enforceable if they are deemed reasonable with respect to the anticipated damages that result from the breach. 

When two or more parties come together to form a business partnership, they are bound by the terms of the partnership. Find out how you can safeguard your rights and interests should a partner breach the terms of the agreement.