Welcome to Part 3 in a 12-part series entitled “12 Warning Signs You’re Headed for a Lawsuit with your Partner”. The third warning sign is…

#3: No Written Agreement

Many of the partner disputes we have handled could have been completely avoided if the partners had a better written agreement from the beginning. A shocking number of joint ventures are done with no more than a handshake or a defective written instrument (everything from, literally, the back of a napkin to some form they pulled off the internet or a document prepared by a lawyer who dabbles in partnership agreements, but has limited experience and expertise). Relying solely on the “handshake agreement”, is extremely risky. It is virtually impossible for two or more people to embark on a business joint venture with any level of confidence that they: (a) covered all the points that need to be addressed during the lifecycle of that venture; (b) covered those points in the necessary level of detail to avoid future misunderstandings, different recollections of what was agreed and disputes, and; (c) will recall what they agreed exactly the same way when they need to remind each other of that agreement when it matters most—when there’s a disagreement. Even if they could do ALL of those things, good luck proving your oral agreement in a court of law.

If you have a defective written agreement, odds are you would not realize that until it’s too late, because you’re too far in to the joint venture and the partners have different concerns, ideas and preferences by that point in time. In that scenario, even though you may have a written document (napkin, internet form, agreement drafted by somebody with insufficient expertise), it’s effective the same as having no written agreement since you have not documented your understanding adequately to address the issue that has given rise to a dispute. Therefore, if you have no written agreement or a defective written agreement, that is another major warning sign that you are walking through a minefield blindfolded, headed for disaster.

What’s the solution? Hire a competent lawyer and get your agreement in writing from the beginning. If you are in a partnership without a written agreement and a document that you are concerned may be defective, it may not be too late…contact an experienced attorney and have them draft a written agreement or do a review of your current document!

If you are entering a partner relationship of any kind, whether it is in an LLC, corporation, general or limited partnership, call us. We can set it up to minimize the risk of future disputes. If you are having challenges with a current partner, call us. We may be able to help you resolve your dispute and avoid a lawsuit. If litigation with your partner is inevitable, we can handle that as well. For more information, call Jeff Lerman at 415-454-0455, x234 or e-mail him at [email protected]