Putting a partnership agreement into writing can sometimes seem as challenging as asking a proposed spouse to sign a prenuptial agreement. However, if a partnership goes awry and disputes threaten the existence of the joint enterprise, you might rue the day you didn’t anticipate difficulties and lock in a mechanism in advance for dealing with them.
Consider this scenario: You and your partner have a thriving business when one or the other decides it’s time to move in a new direction or to withdraw and pursue other interests. You don’t agree with the new direction, and you don’t want to go it alone. So, what are your options?
If you’re in the Philadelphia, Pennsylvania, area and involved in a partnership dispute that seems to be souring by the minute, you need to call our team at Richard L. Vanderslice, P.C. We will work with you to achieve a fair resolution to your dispute while protecting your rights under the law.
A partnership, of course, can involve more than two individuals or entities. Regardless, the possibility always exists that the actions or decisions of one partner can adversely affect the ongoing business relationship.
While some partnership disputes arise from personal issues between the partners, the most common causes of disputes are:
Misappropriation of assets or breach of fiduciary duty
Breach of contract
Real estate disputes
Lost business opportunities
Differing visions for the company
Failure to delineate authority or workloads
Disputes over how resources should be used
All of these potentialities should be anticipated before forging a partnership with mechanisms for dealing with them hard-wired into a written partnership agreement. Even so, disputes can reach a boiling point, at which time a business litigation attorney’s services will be needed.
A breach of fiduciary duty can involve a partner misappropriating funds for personal use. If this happens, sometimes the only recourse if all else fails — arbitration, mediation, negotiation — is a lawsuit to recover the losses.
A breach of fiduciary duty can also involve a business decision that goes awry and costs the partnership assets that could be better used. Here, however, what is called the business judgment rule often insulates a partner acting in an official capacity who makes a decision that turns south.
One partner can also breach the contract binding the group together in their joint enterprise. A contract does not always have to be written; it can also be implied. A contract bestows certain obligations on the signatories. For instance, one party may be responsible for sales, another for delivery of merchandise, another for marketing, and so on.
Though handshakes and verbal agreements can be construed as constituting a contract, a written agreement is certainly the more litigation-ready instrument. Here again, a lawsuit can be brought to recover lost assets or damages.
If a dispute arises, the natural first step is to begin discussions, or negotiations, between the parties. The best time and place for this is not during work hours or at the site of the enterprise. Instead, the parties in dispute should meet elsewhere outside of company hours to attempt a resolution.
If interpersonal negotiations fail to resolve the dispute, the partners can hire an independent, outside mediator who will take neither party’s side but will arbitrate and negotiate dispassionately. The mediator can also be a business litigation attorney who can explain the legal options and ramifications of the situation and thus help the parties arrive at a mutually beneficial solution.
The final step is a dissolution of the enterprise, but this is a step that should not be taken without the advice of an attorney who has helped the partners examine and consider all their options.
Even if the partners already have a business agreement in place, it might be time to redraft or completely rework a new agreement that resolves the issues in dispute. Avoid dissolution and get a fresh start.
When disputes arise and they morph beyond the simple-to-resolve status, it’s time to get the help of an experienced business disputes attorney. If you’re in Philadelphia City or County, or anywhere nearby, you should contact us at Richard L. Vanderslice, P.C. We bring more than three decades of experience to the task of resolving your dispute fairly and amicably.