Business Litigation Blogs

5 Ways You Can Prevent Partnership Disputes in Your Business’ Future

Countless people enter into partnerships every year, whether they know it or not, as many states will recognize the legal existence of a partnership anytime two or more people work together with a common business purpose. The fact that you and others are legally partners – again, whether you have a formal or even an informal partnership agreement – presents great opportunities but it also presents great risks. On the one hand, you can be legally liable for another partner’s actions, but you and your partner may also have disputes which can land you in liability while also endangering the profits and property related to the partnership itself. Here are five ways you can prevent partnership just such disputes from arising.

Draft a Clear, Comprehensive Partnership Agreement

As stated above, there is generally no requirement for you to have a partnership agreement in order for state law to recognize your joint venture with another person as a partnership for legal purposes.

 

Which is exactly why it is so important for you to take action as soon as possible in the life cycle of your partnership to create a partnership agreement which reflects your responsibilities, rights, obligations, and other matters. Of course, your business will change and evolve over time, and your agreement may need to be amended accordingly, but there is no reason to delay creating even a basic partnership agreement at the outset.

Make Clear What Rights Partners Have to Profits

One of the key issues that your partnership agreement should address is what rights each partner has to the profits earned by the partnership. Will it be 50/50 down the middle, or will the profits be apportioned to reflect contributions, labor, sales metrics, or some other factors?

 

By failing to address profits in the partnership agreement, a court may later impose a profit structure different than yours, and the damage may be done in the form of ruined trust and high legal fees.

 

Specify the Roles and Duties of Each Partner

Your agreement should also contain a clear description of the roles and duties each partner will have in the partnership. Is one partner solely responsible for recruiting and sales efforts, for example? Or are both partners expected to put their full efforts into every aspect of the business? A failure to include this could lead to resentment, arguments, and even a lawsuit.

Have an Understanding on Partnership Management and Control

Related to the question of what duties each partner will have is the question of who will be able to make important decisions on behalf of the partnership and how the business will be managed on a day-to-day and long-term basis. Partners do generally have the right to bind the partnership to transactions entered into by only one party, and thus your agreement should make clear how such decisions should be made, e.g. transactions over $5,000 require a unanimous vote by the partners.

Agree on What Financial Contributions Each Party Will Make

Just as the agreement should specify what rights to profits the partners have, it should also include information making clear what financial contributions are expected of each partner. This relates to both property contributed to the partnership at the start of the venture, as well as ongoing financial contributions that the partnership may want to demand of its partners.  

Work With an Experienced Los Angeles Partnership Dispute Attorney

At Wagenseller Law Firm in downtown Los Angeles, our attorneys have extensive experience in resolving all types of partnership litigation matters, including those related to fraud and alleged breaches of the duty of loyalty and duty of care. Contact Wagenseller Law Firm today to schedule a consultation to discuss your partnership dispute.

Can I Avoid a California Breach of Contract Suit if I Was Mistaken About the Facts?

At some point in our lives, all of us enter into some kind of agreement – whether it be for a purchase or sale of a product or service – that we later want to get out of once we learn new, additional, or different facts about the facts underlying the agreement. It could be a summer rental that you now realize is next to a sewage facility, or a contract to provide services to a company you now realize is the arch rival of your biggest client. The danger, of course, in not performing on your contractual obligations is that you could face a breach of contract lawsuit.

But the question then becomes whether the fact that you misunderstood the facts when you made the contract – what we call a “mistake of fact” as a legal term of art in contract law – allows you to rescind the contract and avoid a successful breach of contract suit. Speak to a California breach of contract attorney for in-depth guidance on the particular contract you are facing, but here are a few questions to keep in mind.

Was the Mistake Unilateral or Mutual?

If you and the other party together made a mutual mistake about an aspect or object of the agreement, then it is always possible that you can work with the other party to renegotiate the contract. Of course, if the mistake at issue is something that benefits the other party to your detriment, the other party may not want to renegotiate.

Assuming that both parties are mistaken as to material fact relating to the contract, then courts may allow one party to rescind the contract, which means the court will treat the contract as not existing and thus there is no obligation. The key determination here is whether the fact is indeed “material” – in other words, a significant aspect of the contract.

But if the mistake was a unilateral mistake on your part, meaning only you made the mistake in entering into the contract, there are a few more questions to assess.

Did the Other Party Know of and Take Advantage of the Mistake?

Many contracts involve some inherent risk of mistake, as it would be inefficient for all parties to know all available facts related to the execution of the contract before they entered into it. Thus, California law limits the types of unilateral mistakes that will justify rescission of that contract to a relatively limited type of scenarios.

Generally, before a judge or jury will rescind a contract based on unilateral mistake, it will want to see the following types of factors sufficiently proved by a preponderance of the evidence:

  • That the person seeking rescission did not act excessively carelessly in causing the mistake (one way of thinking about this was whether it would have been easy and expected for the plaintiff to avoid making the mistake);
  • That the other party actually knew that the mistaken party was operating under the mistaken assumption (e.g. was the mistaken assumption communicated to the other party?);
  • That the other party took advantage of the mistaken party’s mistake; and
  • The party seeking rescission would not have entered into the contract had they known the truth.

Again, speak with an experienced breach of contract attorney about your particular circumstances.

Contact the Commercial Contract Attorneys at Wagenseller Law Firm

At Wagenseller Law Firm in downtown Los Angeles, we provide full legal services to individuals and businesses in business and real estate litigation matters. Contact Wagenseller Law Firm today to schedule a consultation to discuss your commercial contract matter.

Joint Property Disputes

Many people own property jointly with one another person or persons, either voluntarily or not. Married couples (or unmarried couples for that matter), business owners, and landlord partnerships purchase property jointly all the time, and, in many cases, people may find themselves as a joint owner of property through an inheritance or inter vivos gift of property, such as from a parent to his or her children. Whether the co-owners decided to become property owners together or suddenly found themselves co-owners with a person that they might not even speak to, much less manage property with, there is always the potential for a joint property dispute. At Wagenseller Law Firm, we represent joint property owners in resolving joint property disputes as efficiently as possible, but are prepared to go to trial if need be to win a favorable outcome in a joint property dispute.

Joint Property Ownership in California

In California, co-owners of property will either own the property as a tenancy in common or as a joint tenancy. If you and the other owner did not specifically purchase or receive the property as a joint tenancy, then you most likely have a tenancy in common. The primary difference between these two is that, when a person dies in a joint tenancy, the other owner or owners will automatically receive that person’s interest in the land regardless of what a will or other instrument might say, while, in a tenancy in common, the owner’s interest would pass to that person’s beneficiaries, making the beneficiary the new co-owner.

With both a tenancy in common and a joint tenancy, each owner has a right to fully occupy and use the entirety of the jointly held property (unless there is a valid co-ownership agreement in place saying otherwise) which can lead to any number of disputes when there are conflicting goals and desired uses for the land, or even where the owners simply cannot get along.

Common Types of Joint Property Disputes

Because every joint property dispute involves unique individuals and the unique dynamic between them, every joint property dispute is different, but there are some common type of joint property disputes that tend to arise:

  • Disagreements over how to use the property (e.g. whether to drill for oil, rent out the land, build a structure, etc.)
  • Disagreements over profits made from the land (e.g. a dispute over how much each party should receive in rents earned from use of the land)
  • Disagreements over expenses (e.g. taxes) and improvements made on the land, and whether one owner should pay the other
  • Activities carried out by one owner that annoy, disturb, or otherwise harm the other owner’s interest in the land
  • A simple desire to avoid sharing ownership with the other party (e.g. personal differences unrelated to the land itself)

Resolving Joint Property Disputes

Whenever possible, it is often best for the co-owners to work out a mutually agreeable plan to resolve their disputes, which might include one owner selling his or her interest to the other, both parties selling the land and splitting the profits, one owner ceasing an activity or agreeing to carry out a duty, and so on. At Wagenseller Law Firm, we can work with co-owner or co-owners to negotiate a workable agreement without having to go to court.

But in cases where no middle ground can be reached, we can also go to court to resolve the matter. The judge may rule that one or both owners are required to take specific actions based on the law, or may order that the land be sold and the profits be divided between the parties. When this occurs, further issues may arise as to the valuation of the land and payments owed between the parties for past rents, expenses, and improvements. As experienced real estate litigators, we will work to make sure you are treated fairly and justly in resolving your joint property dispute.

Work With an Experienced Los Angeles Joint Property Dispute Attorney

Attorney Laine T. Wagenseller of Wagenseller Law Firm has published numerous articles on real estate law and works with individuals and businesses across Southern California in resolving real estate matters, including joint property disputes. Contact Wagenseller Law Firm today to schedule a consultation in order to evaluate your dispute and begin working towards a positive resolution.

Business Litigation Attorney Los Angeles

The business litigation attorneys at Wagenseller Law Firm in downtown Los Angeles are experienced trial attorneys with a wide knowledge of business litigation matters.  We are proud of the work we have done–the trials we have conducted, the settlements we have reached and all of the other business client problems that we have resolved.
[Read more…]

Partnership Attorney Los Angeles

“Partnership attorney Los Angeles” encompasses a lot of situations.  At Wagenseller Law Firm we specialize in partnership litigation in Los Angeles and throughout Southern California.  As trial lawyers we handle partnership lawsuits between general and limited partners, members in limited liability companies, shareholders in corporations, family members in various partnership arrangements and all of the various informal partnerships that business people engage in everyday.
[Read more…]

The Business Litigation Attorney: Standing Up To Your Clients

In a recent interview with LegalCounselor.net, I spoke about figuring out what your client really wants–despite what he or she tells you.  In business litigation the attorney is often instructed to litigate regardless of cost, to fight to the end.  However, the client’s visceral reaction to being sued and to being in litigation is not really the best outcome for the client.  Business litigation attorneys need to figure out what the best outcome is and be forthright in explaining that to the client.  Here is an excerpt from that interview:

[Read more…]

Business Litigation: Do You Have A Roadmap Of Your Case?

Los Angeles real estate litigation attorney Laine T. Wagenseller reveals the elements of the road map the litigator must have before embarking on what may turn out to be a years’ long journey.  Mr. Wagenseller also discusses the importance of doing a practical assessment of the work the case requires, including a thorough, honest and accurate analysis of the existing law so that the client understands the likely eventual outcome.

[Read more…]

Business Trial Attorneys: Being Client-Centric

Laine Wagenseller, a Los Angeles business litigation attorney, explains that the best way to defend your clients’ interests includes understanding what drives them emotionally.  The business trial attorney’s awareness of his clients’ motivations, such as pride or hurt, can strengthen the attorney-client relationship and help the clients understand and evaluate their case.

[Read more…]

Business Litigation: What do I do With a Summons And Complaint?

Our business litigation series seeks to help you understand the litigation process, especially as it applies in the Los Angeles Superior Court.  Today’s article is the first in the series:  What do I do with a summons and complaint?

[Read more…]

Business Litigation: A New Series On How To Handle Business Lawsuits (and Business Attorneys) in Los Angeles

Business litigation attorneys and clients alike don’t often think through the litigation process–what it involves, how the litigation will unfold and what the ultimate goal is.  In the new year we will post articles that address common client questions about litigation.  We will also add ‘lessons learned’ to each post in an effort to share some pointers learned through years of experience.

[Read more…]