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Is litigation the only option in a partnership contract breach?

On Behalf of | Jul 29, 2022 | Contract breach

Starting a business requires time, work and effort. You may decide to take on a partner to help ease some of the stress and burden you face. While this can be a smart tactic, not all partnerships work out.

While it’s smart to create a partnership agreement that outlines responsibilities and expectations, do you know what options you have if your partner breaches this agreement? Is litigation the only way to resolve the matter?

Even though a breach of contract by your partner can feel personal, you should keep emotions out of it and explore the legal options you have to resolve the matter.

Reach a settlement

If you want to keep the partnership in place, a negotiated settlement may be possible. A written settlement agreement will typically be just as binding as any other contract, which means it can be enforced in court. Even though you may have to negotiate and compromise to settle, it will help you avoid expensive litigation.

Consider asking for liquidated damages

You can include a liquidated damages clause in your partnership agreement. With this, a specific amount of money is provided to a partner if the other person’s breach causes damages. An important note is that courts will only enforce these damage clauses if there are anticipated or actual damages.

Protecting your rights in a partnership agreement

Remember, you always have the right to file a lawsuit and settle the matter in court. However, in many cases, choosing one of the alternatives above is a better resolution to this situation. Be sure to seek legal advice to make the right decision for yourself and your business.