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4 ways your business partner may violate your ownership agreement

On Behalf of | Dec 10, 2023 | Business Law

No entrepreneur enters a business partnership wanting the terms of their ownership contract to be violated. Unfortunately, despite one’s best efforts, a business relationship can turn sour due to serious disputes. If you are part of a business partnership, you may be able to resolve such disputes after seeking legal guidance and making certain efforts unique to your circumstances.

In other cases, more serious reorganization may be necessary; you may even need to dissolve the partnership to salvage your business. Familiarizing yourself with ways your partner can violate your contract can help you to minimize these risks.

Breach of confidentiality

Contracts often contain confidentiality clauses to protect sensitive information shared during the course of the partnership. A breach of confidentiality can jeopardize your business’s competitive edge and lead to legal consequences. Clearly define what constitutes confidential information in your contract to mitigate this risk. Additionally, implement robust security measures, such as encryption and restricted access, to help safeguard sensitive data.

Failure to meet performance obligations

Every contract comes with performance obligations that both parties must fulfill. A failure to meet these obligations can disrupt the harmony of the partnership and hinder overall business success. Incorporate specific performance metrics and deadlines in your contract. Regularly assess progress through key performance indicators (KPIs) to identify potential issues before they escalate.

Financial discrepancies and non-payment

Financial disputes are a common source of contract violations. Whether it’s delayed payments or discrepancies in financial reporting, such issues can strain the partnership. Clearly outline payment terms and reporting requirements in your contract. Regularly reconcile financial statements to help ensure accuracy. Additionally, promptly addressing any discrepancies can help maintain trust.

Scope creep and changes without consent

Partnerships evolve, but unapproved changes to the initial agreement can lead to misunderstandings and conflicts. It’s crucial to establish a protocol for altering the scope of the partnership. Include a change control mechanism in your contract, outlining the process for proposing, approving and implementing changes. This can ensure transparency and prevent unilateral modifications that could violate the agreement.

Proactively addressing potential pitfalls can fortify your contractual agreements and foster a resilient partnership. But remember, if a business disputes arising from contract violations become overwhelming, you should consult a legal professional who can guide you on the best way forward.