What are the consequences when your business partner breaches an agreement?

It can be an exciting endeavor to begin a business with a partner or group of people. However, it can cause stress when the partners do not agree on terms and conditions in a partnership agreement. Every business should have a partnership agreement when the partners agree to the terms of the contract.

While in the beginning everything may seem perfect, it’s not uncommon for disagreements to later arise. If you and your business partner(s) have a disagreement about the business, it’s important to try and resolve the issue amongst yourselves.

However, if you’re unable to come to an agreement, you may have to consult the terms of your partnership agreement. It will likely detail what should happen in the event of a breach. Depending on the severity of the breach, there may be different consequences. For example, a minor breach may result in a warning, while a major breach could lead to expulsion from the partnership.

It’s important to be aware of the possible consequences of breaching a partnership agreement, as it can have a major impact on your business. If you’re unsure about the terms of your agreement, it’s best to consult a lawyer to avoid any potential legal issues.

Our attorneys at The Venture Lawyer can help you understand your partnership agreement and advise you on what to do if there’s a breach and make sure your best interests are protected.

What must be included in the p

Limited partnerships (LPs) and limited liability partnerships (LLPs) are the two most common types of business partnerships. The partnership agreement will determine how the partners will deal with a breach of contract, so it’s crucial that all aspects of the agreement are clearly defined. Any uncertainty in the partnership agreement might cause one or more partners to fail to carry out their obligations.

Here are key provisions that must be included in a partnership agreement:

  1. The nature of the business and the partners’ roles
  2. The duration of the partnership
  3. How to admit new partners
  4. How to dissolve the partnership
  5. The partners’ voting rights
  6. Profit and loss sharing
  7. Partners’ capital contributions
  8. Management and decision-making procedures
  9. Dispute resolution procedures

If you’re in the process of drafting a partnership agreement, it’s important to consult an experienced business dissolution lawyer to ensure that all the necessary provisions are included.

Our attorneys at The Venture Lawyer can help you draft a comprehensive partnership agreement that will protect your interests and help avoid any potential legal issues down the road.

Different Legal Remedies for breaching

If one partner breaches the partnership agreement, the other partners may have a legal claim against them. Depending on the severity of the breach, the remedies available may range from monetary damages to expulsion from the partnership.

Expulsion from the company

One of the most severe remedies for breaching a partnership agreement is expulsion from the company. This remedy is typically used when the breach is serious and/or has caused irreparable harm to the business. Your partnership agreement needs to have a clause that addresses the expulsion procedure. If the agreement does not have this clause, you’ll need to consult a business attorney to determine if expulsion is a possibility.

Liquidated damages

Another remedy for breaching a partnership agreement is liquidated damages. This is when the partners agree to a set amount of money that will be paid if there’s a breach. The amount of liquidated damages is typically based on the expected losses from the breach. For example, if one partner breaches a non-compete clause, the damages might be based on the expected loss of business from that partner’s competition.


Another option for resolving a breach of partnership agreement is to reach a settlement between the partners. This is typically used when the breach is not serious and the partners are able to come to an agreement on the terms of the settlement. Settlements are typically less costly and time-consuming than going to court.


Liability will be determined by the type of partnership agreement. In a general partnership, each partner is liable for the debts and obligations of the partnership. This means that if one partner breaches the partnership agreement, the other partners may be held liable for any damages that occur. In an LLP, each partner is only liable for their own actions and not responsible for the actions of the other partners. This is why it’s important to have a clear understanding of the liability provisions in your partnership agreement.