Running a business with one or more partners can be rewarding, but it also comes with challenges. When trust and cooperation break down, partnership disputes often arise. One of the most serious situations is when a partner breaches their legal or contractual duties, leaving the business exposed to financial loss, reputational harm, and legal complications. Understanding your rights and the steps you can take is essential for protecting both the partnership and your future.
Understanding Partnership Duties in the UK
In the UK, business partners owe one another certain duties under both common law and the Partnership Act 1890. These include:
- Duty of good faith – Partners must act honestly and fairly towards one another.
- Duty to account – Profits made from partnership activities must be shared; no partner should take secret profits.
- Duty to avoid conflicts of interest – Partners should not put personal interests ahead of the partnership.
- Duty of care – Partners must act with reasonable skill and care in running the business.
These duties are often supplemented by a partnership agreement, which can set out more detailed responsibilities, decision-making procedures, and consequences for breaches.
When a partner fails to uphold these obligations, whether through negligence, misconduct, or deliberate wrongdoing, a dispute is likely to follow.
Common Breaches Leading to Partnership Disputes
Some of the most frequent breaches that trigger disputes include:
- Misuse of partnership funds – A partner may withdraw money improperly, fail to account for business expenses, or divert resources for personal use.
- Competing with the partnership – Running a side business that conflicts with the partnership’s interests.
- Excluding other partners from decision-making – Ignoring voting rights or disregarding agreed-upon procedures.
- Failure to perform duties – Repeated absence, lack of contribution, or neglect of responsibilities.
- Misrepresentation – Providing false information or concealing facts relevant to the partnership.
Each of these situations can strain relationships and create uncertainty about the partnership’s future.
First Steps When a Breach Occurs
If you suspect or discover that a partner has breached their duties, the first step is to review the partnership agreement. This document usually outlines how disputes should be managed, including internal procedures, mediation requirements, or buy-out provisions.
- Document everything – Keep clear records of the breach, including financial statements, correspondence, and meeting notes.
- Communicate directly – In some cases, raising the issue early can prevent escalation. Partners may resolve matters through discussion if the breach was unintentional.
- Seek independent advice – Before making accusations or legal moves, consult with a solicitor who specialises in partnership disputes. They can assess the situation objectively and help you understand your rights.
Exploring Resolution Options
There are several routes to resolving partnership disputes when a breach occurs:
1. Mediation
Mediation is a voluntary, confidential process where an impartial mediator helps partners negotiate a solution. It is often faster and more cost-effective than litigation. Mediation works particularly well when the partnership relationship still has value and partners wish to continue working together.
2. Arbitration
Arbitration involves a neutral third party making a binding decision on the dispute. It offers more formality than mediation but is usually quicker and less public than court proceedings.
3. Litigation
If other methods fail, litigation may be necessary. A court can order damages, dissolution of the partnership, or an injunction preventing further breaches. While litigation can be effective, it is often lengthy, costly, and may permanently damage the partnership relationship.
4. Negotiated Exit
Sometimes, the most practical solution is for one partner to exit the business. A well-drafted partnership agreement usually includes exit provisions that outline valuation methods and buy-out terms.
Preventing Future Breaches
While not all disputes can be avoided, many arise because of vague or incomplete agreements. To reduce risk:
- Create a detailed partnership agreement – Specify roles, decision-making processes, profit distribution, dispute resolution mechanisms, and exit strategies.
- Review agreements regularly – As the business grows, revisit the terms to ensure they remain relevant.
- Maintain open communication – Regular meetings, transparent financial records, and clear reporting structures help build trust.
- Seek legal guidance early – Consulting a solicitor when drafting or updating agreements can prevent costly misunderstandings.
When to Seek Professional Help
Even if you and your partners are on good terms, a breach of duties should never be ignored. Left unresolved, small issues can escalate into legal battles that put the entire business at risk. An experienced solicitor can:
- Assess whether a breach has legally occurred.
- Explain the remedies available, such as damages, injunctions, or dissolution.
- Represent your interests in negotiations, mediation, or court.
- Protect your financial and reputational position during disputes.
If you are currently dealing with partnership disputes, you can learn more about your legal options through partnership disputes resources and professional advice tailored to your situation.
Final Thoughts
A partnership is built on trust, shared goals, and mutual responsibilities. When a partner breaches their duties, it can feel like the foundation of the business has been shaken. The good news is that UK law provides remedies, and there are multiple paths to resolution—from open dialogue and mediation to arbitration or litigation.
Taking early, informed action is the key. Whether you aim to preserve the relationship or plan an orderly exit, understanding your rights and obligations will put you in the best position to safeguard your business.