Smith + Schwartzstein
Located In Morristown, NJ and New York, NY
973-532-2962

Are you bound by a bad deal your partner made?

You and your business partner don't always see eye to eye. It hasn't been a huge problem in the past. It led to some disagreements, but you always managed to work things out.

Then your partner makes a deal when you're on vacation. You instantly know it's a bad deal, but it's too late to stop it. You're going to lose money. Are you bound to go along with it? After all, you and your partner typically share both losses and profits. You aren't on salary.

Generally, you are stuck with that deal as long as your partnership agreement gives you both the right to make those decisions on behalf of the company. While you don't have to agree on everything, when picking a partner, it's very important to know that you can trust each other. Your financial future is now tied to that person's financial future.

Now, your partner may have violated the agreement, especially if he or she was working toward a financial gain that wasn't in your best interests.

For instance, maybe a parts supplier offered your partner prices that were inflated by at least 50 percent. However, they also told your partner that he or she would get a financial kickback for signing the contract. For your partner, this outweighed the losses -- meaning you were the only one losing out. That's why your partner waited until you were gone to sign the deal.

In a case like that, where there is malicious intent and your contractual agreement was breached, it's important to know all of your legal options.

Source: FindLaw, "Partnership Rules: FAQs," accessed Feb. 23, 2018

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