When you start your business partnership, you and your partner may have the same goals. However, unexpectedly, relationships may sour. Perhaps your partner undertook actions that undermined the company’s reputation and damaged business. In some situations, the only resolution to the conflict is suing your business partner. Consult with an experienced business lawyer to determine how to sue your business partner.
“Business relationships are often like marriages. It is oftentimes much easier to get into a business relationship with your partner than to get out of it.”Business & Litigation Attorney Michael Long
There are various grounds for suing a business partner. The underlying purpose of partnership lawsuits is to remedy damage to the business caused by things like breach of contract, negligence, abandonment, and more.
Common Grounds for Suing a Business Partner
There are many reasons you may need to sue a business partner. However, the following are some of the most common you may encounter.
Breach of Partnership Agreement
Business partners typically share in business decisions. However, if one business partner breaches a partnership agreement, its effects may be disastrous. If you sue your business partner for breach of a partnership agreement, various elements must exist for your claim. These elements include the following:
- A valid, enforceable partnership agreement exists;
- Your business partner has breached a term or terms of the contract; and
- You or your business has suffered damages resulting from the breach.
If the above elements are present, a valid claim for breach of partnership agreement exists, and you may have grounds for suing your business partner. A strong partnership agreement provides clauses addressing courses of action regarding contract breaches. For example, the partnership agreement may provide your partner with a certain number of days to cure the breach. If included in your partnership agreement, and your partner fixes the breach, you may avoid a lawsuit. If your partner refuses to fix the breach, you may have grounds to sue a business partner.
You may wonder whether you can sue your business partner for abandonment. Abandonment occurs when the business partner leaves the partnership. In some situations, the business partner may continue to collect a paycheck despite not actively working. Abandonment constitutes grounds for suing a business partner as it may be considered a breach of fiduciary duty. All partners owe the other a duty to place the interests of the business above their own. If a business partner abandons the partnership to pursue opportunities for themselves, this may constitute a breach of fiduciary duty.
A negligence claim might exist against your business partner if their actions harmed the partnership. The following elements must exist for a negligence claim:
- Duty. Your business partner owes you and the partnership a duty of care. This duty of care requires business partners to make decisions in good faith.
- Breach. Your business partner acted negligently when acting on behalf of the partnership.
- Causation. The breach of duty caused harm to the partnership.
Consult with a business law attorney to determine whether you have a negligence claim against your business partner.
Violation of Intellectual Property Rights
A violation of intellectual property rights belonging to the partnership may also give you grounds to sue your business partner. A partnership agreement may provide that all copyrights, patents, and trademarks are the partnership’s property. However, if your business partner has used this intellectual property for personal gain, their misuse may give you grounds to sue them.
Criminal Activity by Your Business Partner
Sometimes a business partner engages in criminal activity, such as fraud or theft. Criminal acts may include stealing money from the partnership or stealing money from a customer. These activities can both cost your business financially and undermine its reputation. Therefore, they can provide valid grounds to sue your business partner.
Alternatives to Suing Your Business Partner
If you would prefer to explore options for settling disagreements outside of court, alternatives to a lawsuit exist.
You may consider negotiating with your business partner to determine terms of settlement to which you both agree. Settlement may mean the termination of your partnership and repayment of any losses by your business partner. Saving on litigation costs by pursuing avenues other than a lawsuit may serve your partnership’s best interests.
Consult with an experienced business law attorney to explore possible terms of settlement for your situation.
Additionally, mediation may be another alternative to resolving conflicts. Rather than engaging in a lawsuit for months or even years, mediation may provide a more efficient result. However, mediation requires the cooperation of both parties. There is no point in engaging in the mediation process if neither party wishes to work with the other. If mediation is not an option, your best option moving forward is suing your business partner.
Does your partnership agreement include an arbitration clause? An arbitration clause in your partnership agreement may apply to specific situations. Consult with a business law attorney to review your partnership agreement. If an arbitration clause applies to your situation, you may be able to avoid suing your business partner while still obtaining a legally binding resolution to your situation. Arbitration allows parties to settle their disputes out of court while obtaining legally enforceable decisions.
Considering whether to sue your business partner is a difficult decision. A decision to sue will undoubtedly damage the relationship between you and your business partner. The attorneys at BrewerLong have over a decade of experience providing high-quality, tailored legal services to all clients. Hiring a lawyer to assess difficult business decisions mitigates the risk of legal disputes in the future. BrewerLong attorneys ensure each client receives personal attention and meaningful communication. Our team at BrewerLong possesses a thorough understanding of the time, energy, and effort it takes to run a business. We invest in the future of your business. Contact us today to discuss grounds for suing a business partner.
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