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What To Do If Your Business Partner Breaches The Contract

Doing business in partnership is like the two-edged sword. It has both sound and adverse effects. You probably started the bond with your business partner with a belief and aim that it will prevail till the end of the business relationship. But the business partnership, too, falls apart. It may be because of the difference in the vision of two business partners or the breakdown of trust between them.

What if your business partner breaches the contract or the business agreement? It is undoubtedly to take your business into financial trouble. Your business partner may have access to those critical assets like bank account or other business passwords you require to keep functioning your business smoothly. Before you seek any legal assistance, you should give the last try to salvage the partnership. 

But if you fail to get your business partner to budge, several legal remedies can help you find a solution. Let’s get to the process of what to do if your partner breaches the contract!

Preliminary Measures

Filing a lawsuit or taking legal steps against your business partner may make things worse for both of you. You could put in months or even years dealing with things in court. Instead, have a straight talking with your business partner to figure out what the issue is and how it tends to be fixed. 

If that doesn’t go well, contact him in writing. This process will not only convey your willingness that you are serious about resolving the issue but also leaves the trail of evidence when you are going to sue. 

Holding Your Business Partner Liable for Breaching the Contract

If your business partner breaches the business agreement or does anything that directly contradicts the terms of the existing business contract, you can hold him/her liable for breaching the contract.

There may be a different type of contract in place, but you can hold him liable for breaking the terms of your partnership agreement, confidentiality agreement, or non-compete agreement.

A Settlement With Your Partner

If you want to hold your partner responsible for breaching the agreement, but you don’t want to cost your partnership forever, you might look into this option.

Agreeing upon a settlement with your partner might not give you as much as you might like, but it can definitely save your money in the long run by evading the lengthy courtroom battle.

Expulsion of Your Partner from the Company

Whether you can expel our business partner from the partnership or not, largely depends on several factors. Generally, when you are going to expel your business partner, the partnership agreement must be dissolved first.

However, many companies that involve two or more partners now include terms in business contracts that allow the company to run even one of the partners has to undergo expulsion.

The Grounds of Expulsion

Generally, the grounds of the expulsion of a partner is to be documented in the partnership agreement. The agreement will pave the way that how you can expel your partner from the partnership. It can be made by the vote of other partners for any reason and even for no reason. The following are some certain specific reasons for expulsion.

  • Breaching the business agreement
  • Failing to perform the partners’ responsibilities under the agreement
  • Being convicted or charged of a crime
  • Professional misconduct
  • Being bankrupt or filed for a bankruptcy

Under what conditions would you be able to sue for breach of the agreement? In the first place, your agreement must be in writing. Most states have a law considered the Statute of Frauds that determines which kinds of agreements in writing to be enforceable.

Second, you should sue inside the legal time limit. Legal time limits are laws that set the due date inside which a claim or case might be recorded. The due dates may differ upon the conditions of the case.

Seek for Liquidated Damages

If your partnership agreements contain clauses of liquidated damages, you can ask for a particular amount of monetary damages from your partner.

However, enforcing liquidated damages clauses in the court is a difficult task. The court will only enforce the clauses if it finds it reasonable in light of actual or anticipated damages in the partnership lawsuit cases.

Where to Sue?

You might want to sue your business partner for breach of contract in small claims court if the damages you will request fall within its limited jurisdictional amounts. Small claims courts resolve simple disputes quickly and allow claims for dollar amounts ranging from $1,500 to $15,000. The judgment is usually rendered immediately, and appeal rights are limited.

The proceedings in the small claims court are much more informal than the other types of litigation. Here, no parties will be represented by attorneys. If your agreements are in writing and you have the documents or other evidence, you might end up proving your case.

If the damages you are looking for surpass the small claims court, consider suing in the civil court. In the civil court, you can represent yourself, but that is not recommended. The formal settings and the complex rules are not very easy to follow except for a professional business lawyer.

Conclusion

What happens if you sue or remove your partner from the company? There are a lot of issues that you still may have to deal with. The accounting and bookkeeping issues are among them. You need to settle on the money that he has invested for the company. In addition, his belongings or personal possessions which he has at the office has to be returned to him. But it is always a good idea to talk to your attorney before reaching any financial decisions.

If you’re stuck in deciding which attorney or the legal corporation will be best fitted for your case, don’t worry, check Osuji & Smith Lawyers. We have the best Calgary business lawyers who’re highly experienced in commercial business law and breach of contracts. We also specialize in small claims court in Calgary cases. Book a consultation, and we can review your case free of cost!

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