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Small Business Contracts - Contract Law Issue?

Discussion in 'Commercial Law Forum' started by Jennifer, 23 April 2014.

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  1. Jennifer

    Jennifer Member

    23 April 2014
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    I run a small business in NSW. There are several partners involved in this business who all signed contracts prior to opening. One of our partners has abandon the business (in February 2014), stopped paying their share of the rent (for which they signed a lease with the real estate) and is now demanding their share of the initial capital they contributed to start up the business.

    The contract we all signed clearly states that no partner is entitled to their initial capital share until a minimum of 18 months has passed and they either sell their share back to the business or to another interested party. It is only 7 months since we opened the business.

    We are being bullied and threatened with court and legal action if we do not give this person back their initial capital share immediately, although as they said, "I'm willing to cut a deal with the business" to get SOME of their money back.

    I don't believe that this person is entitled to any of their money as they abandon the business and have stated to several partners that they have left the business.

    I would like to know what anyone else thinks about this situation and where we stand legally under contract law?

    This person believes they were "bullied" and "harassed" out of the business and that there is "racial discrimination" none of which can be proven or is true.

    Mediation has been impossible, due the irrational behaviour of this person and their unreasonable demands.

    Some of the business partners want to give him his money so he will leave us alone and some of us do not think he is legally entitled to any money because of the breached of contract, not only with the business but also with the real estate lease.

    We have tried to speak to this partner about getting his money back once 18 months has passed as per the contract but they will not accept this.
  2. winston wolf

    winston wolf Well-Known Member

    21 April 2014
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    Perhaps a solution can be reached without paying for a lawyers new BMW.
    It sounds like some of the partners are willing to let him off the hook and perhaps the business will run better without him.
    May I suggest agreeing to pay him out if he pays the legal costs involved in restructuring the agreements?
    If this is financially viable you can move on and get on with business.
  3. John R

    John R Well-Known Member

    14 April 2014
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    +1 for @winston wolf's practical suggestion.
    You may also consider reviewing the previously signed contracts to make sure that the remaining partners send/serve any notices/documents on the partner that has abandoned the small business in accordance with any contractual requirements (e.g. via registered post, etc.).

    Please keep us updated.

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