Potential remedies when a partner breaches a contract

On Behalf of | Dec 28, 2022 | Business Litigation |

When you and someone else operate a North Carolina business together and share that business’s profits and losses, you establish a business partnership. Many business partnerships involve legal documents stating as much. However, your partnership agreement does not necessarily have to be in writing for it to prove enforceable. If at some point, your business partner breaches the terms of your partnership agreement, you may need to take one of several different avenues to try to resolve the issue.

According to Chron.com, the option that might serve you most favorably may depend on certain variables, such as whether you want to try to preserve the business relationship in the future. However, many people choose to handle a business partner’s contract breach in one of the following ways.

By holding the partner liable

You have the option of filing a lawsuit against a business partner for a contract breach, such as misappropriating partnership funds or leaving the partnership when the agreement had a set duration. You have this option regardless of whether you want to expel this individual from the partnership moving forward. Whether this is the most favorable option might depend on how substantial the contract breach was and how big your business is, among other considerations.

By expelling the partner from the partnership

In most cases, you have to dissolve an existing partnership if you want to expel a partner for a contract breach. You also need to make sure that you made your decision to expel the partner who breached the contract in good faith. Otherwise, you run the risk of the expelled partner coming back and suing your partnership for damages.

Other possible options for handling a partnership contract breach include seeking liquidated damages or pursuing a settlement between parties.