Legal Question in Business Law in California

Breach of Partnership Agreement

I formed a general partnership with 2 others for a website. The site became popular, but never turned a profit. Recently, one of the partners wants the other two to give up our interest so that he can have complete ownership and change the site to hopefully make a profit. One of the other partners is agreeable if I am. However, I see no reason why someone should potentially make money without me when I've invested so much, and am willing to continue to. Because of our disagreement, the partner who wants it all has disabled our access to the site, and essentially hijacked it for his own use. There is nothing that we can do beside legal means to retreave the site from his grasp. It's not worth it to sue him, as the site currently retains no value beside that of sentimental and potential. However, if this other partner makes it into something valuable after having stolen it from us and breached the partnership agreement, can we sue him and claim our 33.33%, and is there a statute of limitations we'd have to sue according to?


Asked on 2/27/02, 3:11 pm

2 Answers from Attorneys

Re: Breach of Partnership Agreement

Generally, the statute of limitations for breach of a WRITTEN contract is four years from the date of the BREACH. Thus, within four years following the first breach of the agreement, you must have lawsuit filed.

An oral agreement generally has a statute of limitations of two years from the date of breach.

However, the agreement might contain other clauses that might limit this in some ways, provide a means of resolving disputes and giving partners an opportunity to cure any alleged breaches without being in violation.

Additionally, his actions now may result in the termination of the partnership. His subsequent use of partnership property may not have as much value as you think.

You should consult with an attorney regarding this subject before simply sitting on it until the guy does well.

J. Caleb Donner

LEGAL WARRIORS (R)

805-494-6557

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Answered on 2/27/02, 3:47 pm
Bryan Whipple Bryan R. R. Whipple, Attorney at Law

Re: Breach of Partnership Agreement

Echoing the previous advice, I think the crucial issue will be at what point the partnership terminates, if at all. Once the partnership terminates, either by agreement or by operation of law, your rights are limited by the Calif. Uniform Partnership Act and generally will be based on the value of your partnership interest at the time the partnership is deemed to have ended. Partnerships are rather fragile entities, and the withdrawal of all but one partner would doubtless cause a termination.

As long as the partnership exists, the partners are fiduciaries of one another and have a high duty of fair dealing, the breach of which could also be cause for a lawsuit, in addition to or perhaps instead of a contract action on the partnership agreement.

If the amounts now involved don't warrant hiring an attorney, you may be best off just negotiating the best terms you can and moving on.

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Answered on 2/27/02, 5:23 pm


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