Is litigation the solution for a non-performing partner?

On Behalf of | Mar 20, 2024 | Business Litigation |

Business partners share a lot of risks and (usually) a huge amount of operational responsibility. During the early stages of a startup, partners may be the main players at an organization. In fact, they may be the only employees.

Partners typically commit to specific job responsibilities and investments. They have to rely on one another to follow through with those promises if the organization they intend to start has any chance of succeeding. Sometimes, one business partner becomes frustrated by a lack of follow-through on the part of the other. They may find themselves making more financial contributions or devoting a disproportionate amount of time to the business because of their partner’s non-performance.

Is litigation the right solution for a frustrated business partner who is not receiving the support they anticipated?

Contracts can impose certain obligations

Immediately taking legal action isn’t always the best option. In fact, it may not even be a possibility depending on the terms established in a partnership agreement. If people previously established an alternative dispute resolution agreement requiring attempts to resolve a matter before taking legal action, a frustrated business partner may not be able to initiate a lawsuit until they first try to resolve the matter amicably.

Even if there is no clause requiring mediation or similar attempts at conflict resolution, a review of the existing partnership agreement can help someone validate their belief that their partner has failed to perform in accordance with that contract.

At that point, litigation maybe he only weighs to resolve the matter. If a partner bound by a contract has not provided financial resources or performed their job responsibilities, gentle reminders may not be enough to resolve the situation. Those blatantly in violation of a contract may continue to ignore the promises that they made to a business partner, possibly because they have gotten cold feet about the endeavor.

Lawsuits can terminate the business or the partnership

Litigation may be the only way to both sever the contractual relationship between the partners and recoup damages generated by someone’s non-performance. Especially if someone has invested time and money in an organization that they must now dissolve due to a partner’s failings, seeking reimbursement for those losses may require a lawsuit. Litigation can take months to complete but may be the best option available for someone harmed by the non-performance of a business partner.

Taking a partner to court can end a business relationship and help to compensate someone harmed by blatant violations of a partnership agreement. Entrepreneurs who hold others accountable for unfulfilled promises may find it easier to move on to the next project without incurring any major financial setbacks.