Can You Sue a Business Partner?
Help With Business Dispute Resolution
While no one starts a business relationship with the intent of souring the relationship and suing their partner, sometimes doing just that is the only possible remedy to protect yourself and avoid further conflict. This is especially true if the partner in question has harmed your reputation or your business’ reputation or has taken some other action to undermine the business.
There are a few different grounds upon which you can sue a business partner. Because the underlying purpose of this kind of lawsuit is to repair damage done from negligence, breach of contract, abandonment, and more, you must be able to demonstrate how your partner’s actions impacted your business negatively. Consulting with an experienced business lawyer can help determine if you have a viable case as well as what steps to take next.
Breach of Contract
Partnership agreements govern who makes decisions pertaining to the business as well as clarify the responsibilities to which each partner agrees. If this contract is breached, the results can impact your business in disastrous ways. There are a few different factors you must keep in mind before you move forward with a lawsuit to pursue a breach of contract claim.
First, you must have an enforceable partnership agreement. Your partner must have demonstrably breached a term of that contract, and you or your business must have suffered damages as a result of the breach. If all three of these elements are true in your situation, you might be able to move forward with a breach of contract lawsuit against your business partner. Note that the specific wording of the contractual clauses will determine whether a breach of contract claim is viable. For example, the agreement might allow your partner to fix the breach within a specified timeframe before you are allowed to bring a lawsuit.
If your partner leaves your partnership or collects a paycheck without fulfilling the terms of your partnership agreement, you might be able to move forward with an abandonment suit on the grounds of breach of fiduciary duty. If your partner failed to place the business’ interests above their own or abandoned the partnership, consult with a knowledgeable Phoenix business attorney.
It might be possible to sue your business partner for negligence if your claim meets the three elements necessary. First, your partner must owe you and your partnership a duty of care. They must have behaved negligently when taking action on behalf of the partnership, and that negligence must have caused harm specifically to the partnership.
Intellectual Property Rights Violation
Some partnership agreements dictate that all patents, trademarks, and copyrights are the property of the partnership, however that doesn’t mean they can be used in every circumstance. If the property has been used for personal gain, it might be considered misuse and grounds for a legal claim.
Criminal activity can sometimes be valid grounds for a lawsuit. If your business partner committed fraud or stole money from customers or from the partnership, they likely actively undermined its reputation and negatively impacted it financially. This might be enough to file a lawsuit against them.
Alternatives to Suing
Not every conflict has to culminate in a lawsuit. There are some other remedies that might help resolve the problem without an excessive amount of time spent in a courtroom. The three main options are settlement, mediation, and arbitration.
Settlements of Business Disputes
Settlements require your business partner to agree to specific terms – terminating their part of the partnership, for example, or a repayment of the losses they caused.
Mediation is another potential conflict resolution strategy. If both parties can work together to find a solution, mediation can be a quicker process than a lawsuit. This is only an effective remedy if both partners agree to participate in good faith. If you cannot work together with your partner, then progressing to a lawsuit might be the best option.
If your partnership contains an arbitration clause, you might be able to settle your disputes out of court while still reaching enforceable legal results. A business law attorney can help determine if your partnership agreement lends itself to arbitration in your specific situation.
Dissolution of the Partnership
You may find yourself needing to dissolve the partnership because of your partner’s breaches or other issues. Your partnership agreement will either provide the steps needed to dissolve the partnership or you will need to follow the Uniform Partnership Act’s requirements. Either way, you need an experienced business law attorney to assist you.
If you need to pursue a legal remedy against a business partner, the experienced team at Anthony Law Group can help. Reach out to us today to schedule a consultation.