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Suing a business partner for losses due to their negligence

On Behalf of | Oct 20, 2022 | Business Litigation

Starting a business is challenging. Watching a business struggle or even fail due to your partner’s negligence is an order of magnitude more challenging, not to mention emotional.

If you’ve been unable to resolve the issue through direct communication, it may be time to seek damages. Here’s what you should consider.

The business agreement is your best asset

The business partnership agreement you signed when you began this journey will be the key to your suit. A strong agreement will specify roles and responsibilities, which will be the foundation of your negligence argument.

For example, if the agreement says your partner is responsible for marketing and all they did was write a few Facebook posts that got no engagement, you have ironclad proof they did not fulfill that part of the agreement.

Negligence outside of the agreement

Proving negligence outside of the agreement is challenging, though there are some flagrant scenarios where you won’t need the agreement for support.

Examples include criminal activity such as fraud or harassment, intellectual property damages and destruction of property.

There’s also abandonment, wasteful spending, making crucial business decisions without your approval and public relations incidents that result in a sustained loss of revenue.

Last-ditch mediation

If your business partner suddenly senses the gravity of the situation, they may be open to resolving the problem through mediation. This is not only a relatively inexpensive way to resolve business disputes, but you can take the opportunity to have the mediator amend or write a completely new, legally binding business partner agreement.

Termination and settlement

One last alternative to an ugly lawsuit is negotiating your partner’s exit from the business and an accompanying settlement. This would be another situation that a mediator could facilitate in the interest of saving time and money.

If you go this route, you should consider hiring an attorney to review the settlement for potentially problematic terms. The last thing you need is a dispute about the document intended to resolve the first dispute.