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Options after a breach of contract by your business partner

On Behalf of | Jul 18, 2022 | Contracts

Starting a business is an exciting feat. You may even take on a partner in the beginning who complements you and has expertise in areas you don’t. After all, two minds are better than one, right?

Unfortunately, not all partnerships go as planned. Because of this, you need to ensure you have a partnership agreement in place from the start. Your agreement will outline the steps you should take and the options you have if someone doesn’t live up to the terms in the agreement. 


There’s no way to expel your partner from the business unless this is a term that’s listed in the initial agreement without dissolving the partnership completely. The exception is if you have a two-person partnership. In this case, it’s possible to create a new partnership without the member who is expelled and a new partnership agreement. 

Liability for misappropriation

If your partner is guilty of misappropriation of partnership assets, then you can sue them to receive compensatory damages. The amount you receive is based on actual damages minus the initial investment the departing partner made. 

Liquidated damages

If your agreement included a liquidated damage clause, it means there are set damages awarded to you based on the other partner’s breach. These damages are only enforceable if they are reasonable and occur due to anticipated or actual damages in the partnership. 

Knowing your options

If a partner breaches the agreement you have in place, you have legal options to settle the situation. Knowing what legal options you have will help you take the proper steps if this occurs. Just remember that it’s important to follow the agreement you both signed when you formed the partnership.