What to Do If a Business Partner Breaches Your Agreement
Running a business with a partner often relies on trust, shared goals, and a clear legal agreement. Unfortunately, disputes can arise when one partner fails to meet their obligations. A breach of a business agreement can put your finances, reputation, and the future of your company at risk. Understanding your rights under Australian Commercial and Corporate Law is essential to responding effectively and protecting your interests.
This article outlines the practical and legal steps to take if a business partner breaches your agreement in Australia.
Understand What Constitutes a Breach
The first step is to determine whether a breach has actually occurred. A breach happens when one party fails to perform their obligations as set out in the agreement. Common examples include:
Failing to contribute agreed capital
Misusing company funds
Competing with the business unlawfully
Failing to meet performance or management duties
Breaching confidentiality or restraint clauses
Under Australian Commercial and Corporate Law, breaches may be classified as minor, material, or repudiatory. The seriousness of the breach will influence your available remedies, so careful assessment is critical.
Many agreements require mediation or notice before legal action can be taken. Failing to follow these steps could weaken your position later.
Document the Breach Thoroughly
Evidence is crucial in any commercial dispute. Keep clear records of:
Emails, messages, and written correspondence
Financial records and bank statements
Meeting minutes
Witness accounts
Copies of the signed agreement
Strong documentation will support your claim and improve your leverage during negotiations or court proceedings.
Attempt Early Resolution Where Possible
Not all breaches need to end in litigation. In many cases, disputes can be resolved through:
Informal negotiations
Mediation
Commercial arbitration
Australian courts encourage alternative dispute resolution, particularly in Commercial and Corporate Law matters. Resolving the issue early can save time, legal costs, and business relationships.
Issue a Formal Notice of Breach
If informal discussions fail, the next step is often issuing a formal notice of breach. This document:
Identifies the breach
Refers to the relevant contractual clauses
Requests rectification within a specified timeframe
Reserves your legal rights
A properly drafted notice demonstrates seriousness and may prompt compliance without further escalation.
Consider Legal Remedies Available
If the breach continues, Australian Commercial and Corporate Law provides several remedies, including:
Damages - Compensation for financial loss suffered
Specific performance - A court order requiring the partner to fulfil obligations
Termination - Ending the agreement where permitted
Injunctions - Preventing further harmful conduct
The appropriate remedy depends on the agreement terms and the severity of the breach.
Know When to Exit the Business Relationship
In some cases, continuing the partnership may no longer be viable. Many business agreements include exit or buy-out provisions that allow one party to leave or force the sale of shares. Understanding these clauses can help you exit strategically while minimising loss.
If no exit mechanism exists, court-ordered dissolution or winding up of the business may be considered as a last resort.
Seek Professional Legal Advice Early
Commercial disputes can escalate quickly. Consulting an experienced Australian commercial lawyer ensures your actions comply with the law and protects your long-term interests. Early advice often leads to better outcomes and avoids costly mistakes.
A business partner breaching an agreement is stressful, but you are not without options.
By acting promptly, documenting the breach, and understanding your rights under Australian Commercial and Corporate Law, you can take control of the situation and safeguard your business.
If your business partner has breached an agreement, don’t wait.
Speak with an experienced Commercial and Corporate Law professional. Contact New South Lawyers today to protect your business and your future.
