What Are the Elements of a Partnership Agreement?

Forming a partnership isn’t just about doing business together. It’s also about creating a contractual business relationship. The parties’ preferences and priorities generally guide a partnership agreement’s particular terms. Most internal business contracts between partners cover the following subjects and questions: Who has made a financial contribution to the partnership, and how much? Have the partners agreed to make ongoing financial contributions? Is the partnership a general partnership, a limited partnership, or another business type? What are the rights and responsibilities of each partner? How much compensation does each partner receive? What happens if a partner breaches the partnership agreement? What are the partners’ respective ethical obligations (fiduciary duties) to the partnership? Who is entitled to vote and who must vote, and when? How does someone become a partner? A well-written agreement with well-defined terms can make all the difference when a dispute arises.

What Are the Remedies for a Breach of a Partnership Agreement?

Now that we’ve covered some common breaches, let’s take a closer look at the available remedies for a breach of contract, including a breach of an LLC operating agreement or a partnership agreement. As a preliminary matter, the terms of the partnership may stipulate what remedies are available. Additionally, the contract may limit your recourse options. Exceptions may apply, so it’s best to talk to a knowledgeable business attorney. Filing a Breach of Contract or Breach of Fiduciary Duties Claim If your partner doesn’t abide by the partnership agreement terms, you or the company may have to sue your business partner for breach of contract. This breach of contract action may include allegations that your partner didn’t deal fairly with you or act in good faith. The duty of good faith and fair dealing extends to the partnership under Texas law. In Texas and most other states, business partners owe a duty of care and loyalty to the company. Depending on what occurred, you may also have a claim that your associate didn’t act ethically. If that’s the case, you may have a claim for breach of fiduciary duties against the partner. Negotiating a Settlement Between the Partners One way to resolve a business dispute is to negotiate and finalize a settlement agreement. Typically, you would do this while a lawsuit is pending, but there may be exceptions. During settlement negotiations, the parties define what went wrong and the appropriate remedy. As part of a settlement, the parties usually agree to keep the arrangement details and the settlement amount confidential. Related: Resolving Disputes Through Arbitration Expelling the Breaching Member from the Partnership Depending on the terms of the partnership agreement and the specific circumstances, you may be able to remove the breaching member from the partnership. The applicable law and governing contracts—such as buy-sell agreements—determine if this option is available to you. Pursuing a Damages Award Pursuing a damages award may be the best option to remediate the harm suffered by the business. The applicable law and terms of the partnership agreement may define and limit the scope and amount of damages available. Maximize the damages you may receive by contacting a knowledgeable and skilled business attorney.

Remedies for Breach of Partnership Agreement

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