Partnerships work for many entrepreneurs, but not all. Undoubtedly, a partnership is beneficial in the business industry. However, it may also lead to losses if mistakes are made, and one of them is not having a binding contract.
An agreement with strict terms is key to a long-term partnership. Nonetheless, your partner can breach it. This guide discusses what you can do if this happens.
How can you tell?
Your partner breaches the contract when they fail to abide by any of the terms included in it. Thus, if they fail to operate in the best interest of the company, mismanage funds, treat employees unfairly, make decisions without following the set process, act outside their authority scope, fail to observe conflict resolution methods or exit the partnership contrary to the agreed terms, they may have breached the contract.
Some of these signs may be subtle. For example, a partner may misappropriate funds and cover their actions for an extended period. Thus, while trusting your business partner is crucial, you should stay updated with the company’s operations and finances. You and your partner should meet frequently to get more information on each other’s authority scope. This way, you can spot unusual behavior sooner.
What should you do?
If you believe or have confirmed that your partner has breached the contract, you should follow the agreement terms. Your partnership contract should have a clause addressing the breach of contract. It will help to act according to it. Expelling a partner or acting contrary to the agreement may result in a breach of contract from your side.
The breach of a partnership contract can be complicated. It will be best to get legal guidance to make informed decisions.