Should you sue for breach of the partnership agreement?

When you created a legal partnership and opened a North Carolina business, you expected that you and your partner would work together well under the specific terms of the contract you both signed. Now, however, your partner has breached the partnership agreement. What can you do?

According to, you may be able to file a lawsuit against your partner, depending on the nature of the breach. For example, if the breaching partner has misappropriated partnership assets, you may begin litigation to recover the funds through an award for compensatory damages.

Your contract may include a clause regarding liquidated damages. If so, the language of this clause should provide the amount of monetary damages your partner owes you as a result of the breach. However, simply having the clause may not be enough. A judge may not enforce the clause if he or she determines that the amount is not reasonable when compared to the actual or anticipated damages. Even so, you may still recover compensatory damages.

Depending on the terms of your agreement, you may have to dissolve the business if your partnership fails. Rather than go to this extreme, you may be interested in seeking to find a resolution with your partner that allows both of you to continue to work together. You may decide to sue, and then offer to settle, or suggest mediation or arbitration as a method of resolving the dispute. Not only could this save your partnership, it could also save you the expenses of litigation.

This information is provided as a general overview of partnership agreement breaches. It should not be interpreted as legal advice.