Legal Steps To Take if a Business Partner Violates an Agreement in Mississippi

Entering into a business partnership, few people expect willful breaches of the agreement or disputes to arise, but they are relatively common.

Mutual trust, respect, and shared goals are admirable qualities to go into the business relationship with, but provisions should be included for violations of partnership agreements. Disagreements and disputes should be expected and legislated for.

Taking the right legal steps with disagreements can be the difference between successfully protecting your business and suffering financial and operational losses.

If you’re involved in a breach-of-contract dispute in Mississippi, the following information could be invaluable in keeping your dispute out of court.

Business agreement violations occur for many reasons from simple misunderstandings to willful deception to inaction or incompetence. Unless the breach is dealt with effectively, it can severely impact a business.

A business contract defines the obligations of each party. If a partner fails to meet those obligations without a legitimate reason permitted under the contract, it may be regarded as a breach.

Sometimes, the breach is genuinely unavoidable, due to an unforeseen circumstance. At other times, the breach is intentional and blatant, such as:

• Refusing to take a particular action.
• Missing agreed-upon deadlines.
• A declaration to abandon one’s responsibilities.

Conversely, the breach may be subtle and simply due to a lack of focus, effort, or engagement by one of the parties.

On many occasions, a breach of contract can be addressed by discussions between the parties to set the matter straight. If discussions do not work and/or the breach results in a material violation of the contract and causes damages, legal action may be necessary

Some typical signs of a failing business partnership that can result in a breach of contract include:

• Lack of engagement: If one partner goes silent, it could be a sign of lost interest, leading to withdrawal of efforts, skipping meetings, or ignoring responsibilities. This should be addressed before it starts to damage decision-making in the business.
• Unilateral decision-making: Rather than losing interest, another problem is a partner seizing too much control and making major decisions without consulting the other partners.
• Strategic disagreements: Partners disagreeing on the direction of the business can also be a “red flag”. If one partner believes in rapid expansion while the other prefers steady growth, it can lead to conflict, a lack of cooperation on key matters, and a potential breach of contract.
• Competing interests: If a partner starts a side business that competes directly with the partnership business, this could breach the contract.
• Manipulating financials: Business parties have a fiduciary duty to their partners. Any attempt to deliberately manipulate financial records could result in legal proceedings.

How you respond to a breach of contract could set the tone for the future relationship between business partners. Heading straight to court is rarely productive and usually heightens the conflict. Fortunately, there are far better ways to handle most disputes.

Conduct a thorough review of the agreement

The first step is to refer to the main legal guide for your business partnership: the contract. Review the agreement closely and note the precise terms included to check if a breach has occurred.

A comprehensive contract should include a full rundown of partner responsibilities and steps for dispute resolution, which can guide your next steps. There may be buyout provisions, termination clauses, and non-compete clauses.

Start gathering documentation

Before taking action, make sure you have supporting evidence for the breach of contract claim. Depending on the nature of the alleged breach, this could be emails, meeting notes, financial reports, or other documentation.

If the suspected breach is harder to prove, such as financial irregularities, you may need to hire a forensic accountant and interview witnesses to investigate the matter.

Start structured communication with the partner

If you’ve discovered a breach of contract and can prove it, it’s time to talk to your partner directly. Plan the discussion and choose the right time and place to avoid escalating the matter unnecessarily.

When you discuss the issue, point to the terms of the contract and the evidence of the breach. Keep the discussion structured to prevent personal or emotional confrontations that can heighten conflict. If possible, propose a solution, such as an extended deadline, revised terms, or mediation.

The matter may be resolved through calm discussion and negotiation. If not, further steps may be required.

Send a formal Notice of Breach

It is advisable at this stage to send a formal Notice of Breach to the breaching party. This letter warns the alleged offender that unless the matter is resolved, further legal action will result.

A Notice of Breach should be professionally drafted and include:

• A clear description of the breach.
• Details of the specific contract clauses violated.
• A request for corrective action within a reasonable timeframe.

Mediation or arbitration

Depending on the agreed-upon dispute resolution process outlined in the contract, you might need to initiate mediation or arbitration to attempt to resolve the matter.

Mediation involves a trained and impartial mediator to facilitate discussions but matters remain private and the partners retain decision-making powers. With arbitration, an adjudicator who is familiar with your type of business dispute will hear evidence from both sides at a private hearing and make a legally binding decision.

Litigation and trial

If none of the alternative dispute resolution methods work, the only viable option remaining is suing for damages. Because of the costs and time involved in litigation, this would usually be a last resort if serious damage has been caused to the business.

Even if litigation becomes necessary, there is a good chance that the matter can be resolved before the need for a trial. There are usually opportunities for mediation sessions as the case makes its way through the civil courts in Mississippi. Resolutions may include financial compensation, specific performance fulfillments or cancellation of the contract.

Note that litigation is only advisable with the assistance of appropriate legal counsel.

Consider a buyout or dissolution

With litigation, there is far less chance of the business partnership surviving. Injunctions may be sought and the partnership may be dissolved as part of the proceedings.

Alternatively, a contract may allow for a forced buyout. The benefit of this is that the breaching partner can be removed but the business remains intact.

Professionally drafted, legally enforceable business contracts can prevent legal disputes.

Non-compete agreements are an essential part of the business contract landscape, protecting a business’s intellectual property and trade secrets when a business relationship ends.

To ensure that a non-compete agreement meets the legal standards and is legally enforceable, focus on the following when drafting the contract:

• Reasonableness of restrictions concerning the geography, duration, and the nature of the work the employee is prohibited from doing.
• Protect only legitimate business interests, such as trade secrets, proprietary information, or customer relationships.
• Consideration, which is the value given to the employee in exchange for agreeing not to compete, such as the offer of employment, a promotion or access to valuable company information.
• No undue hardship imposed by the agreement, such as preventing the employee from earning a reasonable living or finding suitable employment.

Broken or failing contracts can be a liability for a business, as well as a major inconvenience. You can protect your business from breaches of partnership and non-compete agreements by seeking qualified legal help from a business contract lawyer when drafting contracts.

This will ensure that the contract terms are strong and fair, obligations can be monitored closely, exit strategies are present, and the agreement is legally enforceable in Mississippi.

If you need legal help with a partnership dispute in the Biloxi area of Mississippi, contact a lawyer at Rushing & Guice, PLLC for legal advice and assistance.