Common Business Disputes that Could Lead to Litigation

If you own a business, you understand the importance of good planning. You likely spent hours upon hours researching and organizing before you even opened your doors to the public. Successful businesses don’t just happen, they are the result of careful planning and execution. Unfortunately, some business owners overlook an essential aspect of their business planning.
 

It is extremely important to add terms in your agreements for how you and your business partners will handle potential disputes. Don’t forget, a business partnership is a legal relationship by nature, and you’ll need more than a verbal agreement in order to handle a dispute with your partner. 
 

Of course, no one expects to have these disputes. Despite how unlikely you may feel it would be, there are many potential disagreements that lead to litigation. Today, the business litigation attorneys at The Frazer Firm will explain some of the most common disputes we see between business partners, and give general advice on what you can do to protect yourself and your business. 

Breach Of Contract  

The first and most common business partner dispute we see is a breach of contract. In short, this occurs when one party doesn’t uphold their end of the bargain as specified in the contract. There are many ways a business partner can breach their contract, even without intent. One of the most common ways we see this happen is when one partner tries to take on too much responsibility and fails to deliver.
 

In order to avoid this type of situation, it is important to be clear about each person’s responsibilities from the start. You should also have a plan in place for what will happen if one partner breaches the contract; this way, you can take action quickly and avoid any legal issues.
 

Misrepresentation or Fraud 

Misrepresentation or fraud occurs when one party makes false statements in order to convince the other party to enter into a contract or take some other action. For example, let’s say that you are considering entering into an agreement to acquire another company, and during negotiations, the representative from the other company tells you that their company is much more financially successful than it actually is.
 

This representation was made in order to make their company seem more successful and valuable, supporting a higher acquisition price for the business. The buyer of a business must perform its due diligence to ascertain the value of its target, but sometimes financials are adjusted or hidden to support the misrepresentations of value.  If the buyer finds out that the company was not as successful as they claimed, you could argue that you were fraudulently induced to enter into the transaction and that you would never have executed the transaction if you had known the truth. 

Tortious Interference with Contractual Relations 

Tortious interference with contractual relationships is yet another very common cause of business litigation. This occurs when one party intentionally interferes with a contractual or business relationship between a business and a third party. 

For example, if you learn that a competitor has taken steps to interfere with or damage your contractual or business relationship with a supplier or vendor, there may be a viable claim for tortious interference.  

If you believe that someone has interfered with your company’s contractual or business relationships, you should speak to one of our attorneys at The Frazer Firm as soon as possible. 

Learn More > Tortious Interference 

Breach of Fiduciary Duty 

A fiduciary duty is a legal relationship in which one party has the responsibility to act in the best interest of another party. This type of relationship is typically found between a company and its shareholders, officers and/or directors. 
 

Each individual with a fiduciary duty has a responsibility to act in the best interest of the company and not engage in any self-dealing. A breach of fiduciary duty against the company’s best interest can have serious consequences for the relationship between owners and management of a company. 
 

Partnership Dissolution

Finally, we wanted to touch on partnership dissolution, or the process of ending a partnership. Partnership dissolution can occur for many reasons, but it typically happens when the business partners have a disagreement that they cannot resolve.  This is called a deadlocked company and operations and management can stop altogether.   

If you are considering dissolving your partnership, corporation, or limited liability company, it is important to first seek counsel from an attorney, such as the experienced business attorneys at The Frazer Firm. There are many legal issues that need to be considered when dissolving a partnership, and an attorney can help guide you through the process. 

Prepare with a Partnership or Operating Agreement 

A well-crafted LLC operating agreement can help prevent disputes by clearly defining the roles and expectations of each owner, member, or partner to the company. In the event of a disagreement, the partnership or operating agreement can provide a framework for resolving the issue without resorting to costly litigation.
 

By taking the time to draft a comprehensive partnership agreement, you can protect yourself, your business, and your co-owners from potential conflict down the road.
 

Contact The Frazer Firm

These are just some of the common business partner disputes that we see at The Frazer Firm. If you are currently experiencing a dispute with your business partner, we encourage you to contact one of our experienced business attorneys today.
 

At The Frazer Firm in Jupiter, Florida, we have a team of experienced business litigation attorneys who are ready to help you resolve your dispute. Call us today at (561) 295-1551 for a free consultation.