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Can partnership contracts address partner disputes?

On Behalf of | Nov 1, 2019 | Business Law |

If a dispute between business partners goes to court, both partners may end up paying a lot of money in legal costs. A protracted dispute may also harm the business. Some Oregon entrepreneurs decide for this reason that going into business with a partner is not worth it. Still, it is possible to build safeguards into your partnership contract that allow you and a partner to solve disputes without the need to go to court.

Harvard Law School explains that a dispute resolution clause in a business contract can require partnership disputes to be handled in different ways. It may require disputing parties to resolves matters outside of a courtroom. Business partners could take their dispute before an arbitrator who will examine their case and, like a judge, render a decision. Partners may also have their dispute resolved in mediation.

The severity of a disagreement may dictate which means to use to solve a dispute. Mediation may be used to help disputing parties when the disagreement is not as severe and may be the result of a misunderstanding. Arbitration, conversely, might be an option for disagreements more serious in nature. Arbitrators are often needed when parties cannot mutually come to an agreement. Instead, an arbitrator will impose a solution.

To try to head off a serious partnership dispute, some business contracts include dispute prevention clauses in their contracts. These clauses are intended to help business partners avoid disputes by engaging in activities that facilitate strong communication, jointly monitor business progress, and quickly deal with minor disagreements. When successful, such measures may prolong a business partnership and keep the business running efficiently.

Given the options available, consulting with a business law attorney may help you to understand how you can prevent partnership disputes from damaging your business. The information presented in this article is only intended for educational purposes and is no substitute for the advice a professional attorney can provide.