Unfortunately, the next step you take may require the legal steps needed to sue your business partner for their actions or inactions. Moving forward with a Houston business divorce lawyer can provide the direction you need to come out on the other side with your finances intact. Let’s discuss some of the reasons you may need to sue a business partner in Texas, understanding that there is support to get through the uncertainty in the evolution of a business.

Reasons for Suing a Business Partner

Countless reasons may arise that require you to take legal action against a business partner. Many disputes can be resolved through settlements, arbitration, or mediation. Here are some of the most common reasons one business partner decides to sue the other partner.

Activities That are Criminal in Nature

It can be shocking to learn that a person you have placed trust in as a partner is engaging in criminal activity. As a partner, these behaviors can quickly reflect on you. Embezzlement, fraud, and theft by one partner are the most frequent activities that give way to legal action. Any of these actions reflect on a business’s overall integrity, potentially resulting in a tremendous loss for innocent partners. Suing may be your next course of action.

Breach of the Partnership Agreement

A partnership agreement defines how a business will run and sets a standard for operations, financial decisions, and the division of ownership. When one partner continuously steps outside this agreement, taking legal action to save the business is a valid option. How can you prove a breach of a partnership agreement?

Proving a breach of contract usually (but not always) requires documentation. The guidance of a Houston business litigation attorney will ensure that you have the information you need to pursue the damages you have suffered.

Breach of Fiduciary Duties

Each partner in a business has a responsibility to the business and to the other business partners to conduct operations in a way that is most beneficial to the company as a whole. At times, a partner can become distracted from goals that are best for everyone and begin to focus on benefiting themselves, taking from other contributing partners in the business. Examples of breach of fiduciary duties include:

• A partner profiting at the company’s expense
• Sharing the company’s trade secrets
• Acting to benefit a competitor
• Hiding or postponing essential documentation from other partners
• Participating in actions that damage a business’s reputation

A breach of fiduciary duty can damage a company and its partners. Disclosing a business’s intellectual property can undermine a company’s existence, making its demand plummet.

Abandonment

Abandonment reflects the actions previously discussed. It may be that a partner decides that the business is no longer where they choose to focus their energies. However, leaving a company can go against a partnership agreement that has established timeframes of commitment for each partner.

Additionally, suing for abandonment might be the course of action when a partner’s actions are for intentional gain, acting against the company’s best interest. Abandonment can result in a compromised position for the other partner.

Negligence

A breakdown in actions that results in a lack of caution expected of a reasonable person is considered negligence. Negligence can have both short and long-term effects on a business. Either way, negligence is costly. Examples of negligence include:

• Extreme risk-taking in business deals
• Improperly evaluating business deals
• Hiring employees that are unqualified
• Mishandling money
• Mishandling of critical documentation

One partner’s negligence can result in legal consequences for all partners involved in a business. An example would be if one partner fails to hold up the agreements in a contract resulting in accountability for each and every partner.

Securing Representation to Prevent Lawsuits

Many people view hiring an attorney as an aggressive step further threatening the stability of a company, but this is not the case. Intervention is necessary if a partner’s actions have you considering filing a lawsuit. A Houston business attorney can present options and alternatives to help you avoid a lawsuit while securing your business interests to prevent impending failure.

Berg PC have decades of experience diving into the root of partnership challenges and offering solutions that efficiently work without disrupting business operations. A business attorney can also comb through the intricacies of partnership agreements to understand where each partner stands regarding their duties. Businesses constantly shift and change, requiring partners to be honest and share in the demands that any company can place on the responsible parties.

A Houston business attorney understands the value of exploring options other than a lawsuit when possible. Even when business partners consider settlements, approach mediation to find a resolution, or arbitrate to find legally binding solutions, a Houston business attorney will look out for your best interests to prevent the current conflicts from reoccurring in the future.

Protect Your Houston Business Investment

Every business partner hopes to approach a business conflict with the outcome being resolution. But the cost of doing nothing or moving slowly to prevent the collapse of a business can be devastating for every partner that has invested in a company. When alternative problem-solving methods fail to work, Berg PC will aggressively represent you in your case, seeing it through the trial process to reach a conclusion.

Partnerships are essential for business. So is finding representation that strives to maintain your stability in a company. Our Houston business litigation team is skilled in resolving partnership disputes but never shies away when it is necessary to approach a business divorce and file a lawsuit against a business partner.

Disclaimer: The information provided in this article and on this blog is for general educational and informational purposes only. It is not legal advice and should not be relied upon as a substitute for consultation with a licensed attorney regarding your specific situation.

The post Grounds for Suing a Business Partner appeared first on Berg PC.

Shareholders should be aware of the duties owed to them when purchasing stock in a company.

The following discussion examines the establishment of the fiduciary duty owed to shareholders by the directors of a corporation.

What is a Shareholder?

Texas Annotated Code § 1.002(81) provides that a shareholder is a person who is issued shares by a for-profit corporation or is a person who gave shares by a for-profit corporation that are held in a voting trust on the owner of the share’s behalf. A share is a financial security that indicates the holder of the share is a part owner of the issuer of the share. A shareholder is a part owner of the corporation that issued the share.

Because shareholders own a portion of the corporate entity, the shareholder is entitled to certain rights under state and (sometimes) federal law. The directors of the corporation and the appointed officers have a set of responsibilities to act in the shareholder’s best interests.

What is a Fiduciary Duty?

One example of fiduciary duty is the underlying responsibility of the directors and officers of a corporation to act in the best interests of the shareholders. To become a shareholder, the holder of the share typically exchanges something of value to obtain a share of ownership in the company. Once the exchange has been completed, the directors of a corporation must operate the corporation in a way that meets the financial interests of the shareholder. Any deviation from those duties can result in legal action from the shareholders.

Understanding the Basic Structure of a Corporation

The vast majority of corporation types are established using the same basic structure, which includes the creation of a Board of Directors, the appointment of corporate officers, and in some cases, the issuance of stock to shareholders. Each portion of the corporate structure creates a foundation for success that allows companies to flourish. However, the only way a company can lawfully do business in the state of Texas (and all states across the country) is to abide by the responsibilities assigned to each party.

Most importantly, it is the role of the Board of Directors to make proper decisions that are in the best interest of the corporate entity and its shareholders. Under Texas Annotated Code § 21.401(a), the Board of Directors exercises or authorizes the corporation’s powers and directs the management of its business and affairs.

Essentially, the board is tasked with establishing a structure for business operations. This includes, but is not limited to:

• Empaneling directors to the board
• Drafting and executing bylaws
• Hiring corporate officers to manage their corporation’s daily affairs
• Addressing the corporation’s outstanding liabilities
• Issuing stock to be purchased by potential shareholders
• Establishing procedures to wind up and dissolve the corporation

Understanding the Duties Owed to Shareholders

As discussed above, directors of a corporation owe a fiduciary duty to shareholders to act in their best interests when making decisions that impact the core mission of the corporation, in most cases to maximize shareholder value by engaging in commercial activity. In some instances, decisions made by directors (hiring a Chief Executive Officer, purchasing new equipment, opening up sales in a new market) may harm the corporation.

Although these decisions may harm shareholder value, it does not necessarily mean an incorrect business decision breaches the director’s fiduciary duty. Instead, a breach of this duty means the director or directors deviated from protecting and serving the best interests of the shareholder–often for personal gain. Below is a breakdown of the responsibilities prescribed to directors in their role as a fiduciary to shareholders.

Duty of Loyalty

Core to all fiduciary duties is the duty to be loyal to shareholders. Directors must act in good faith when making decisions that impact the corporation. This means that directors cannot make decisions that promote their own self-interests or that of third parties over the interests of shareholders – known as “self-dealing.”

A common loyalty issue is that of usurping corporate opportunities. Directors are often the first to be aware of business opportunities available to the corporation. A director may usurp these opportunities by taking advantage of the opportunity themselves or on behalf of another party. This can lead the corporation to miss a business opportunity and be a detriment to shareholder interests.

Duty of Obedience

The duty of obedience (also known as the duty to follow the law) requires directors to obey all local, state, and federal laws regarding the corporation’s administration and to conduct its operations lawfully.

Although the corporation bears the responsibility for certain civil and criminal acts based on its operations, a director may be found personally liable if that director knowingly committed unlawful acts or had direct knowledge of representatives of the corporation committing such acts. This type of conduct can result in a breach, allowing shareholders to pursue civil damages against the directors and seek their termination from the corporation.

Duty of Care

Lastly, directors must maintain a duty of care to meet their fiduciary duties to shareholders. All directors are held to a reasonably prudent person standard in performing their duties. This means that a director must act as a reasonably prudent director would act under similar circumstances.

Directors may shield themselves from liability by adhering to the business judgment rule. Under the rule, a director may not be found liable for mistakes when using their business judgment, even if their mistakes harmed the corporation. They may shield incompetent, negligent, or misinformed directors.

However, if the director’s actions were found to be grossly negligent, fraudulent, illegal, self-dealing, lacking in any judgment, or uninformed with reasonable access to proper information, they may have breached their duty of care.

Compliance with Fiduciary Duties

Directors are required by law to act in the interest of their shareholders. However, even the most lawful, informed, and prudent director is subject to the same scrutiny as any other director. Good shareholders should be mindful of corporations that bear their financial interests. Thus, below is a list of acts or omissions that should raise a red flag for shareholders:

• Directors who are unqualified to perform their essential duties
• Directors who fail to communicate with other directors, officers, and shareholders
• Directors who often miss or fail to participate in regularly scheduled board meetings
• Directors who are unaware of changes in corporate policy or governance
• Directors who fail to supervise subordinates, including appointed officers and other executive-level staff
• Directors that do not review essential business items like bylaws, policies, new contracts, mergers or acquisitions, executive compensation, budgets, and legal issues
• Directors that possess a history of deviating from the wishes of shareholders

Legal Counsel for Fiduciary Duties Issues

Shareholders have a fundamental right to have their investments protected. Thus, a shareholder that has questions about their investment in a corporation or believes a director or an officer of a company holding their investment is not meeting or upholding their fiduciary duty should seek legal counsel.

Please get in touch with a Houston business litigation attorney at Berg PC today to learn more about your rights as a shareholder.

Disclaimer: The information provided in this article and on this blog is for general educational and informational purposes only. It is not legal advice and should not be relied upon as a substitute for consultation with a licensed attorney regarding your specific situation.

The post Fiduciary Duty to Shareholders Explained appeared first on Berg PC.

You entered into your contract agreement carefully. You thought the terms were clear, and you signed on the dotted line feeling confident. You trusted the other party to fulfill their duties and leave you with a “job well done.” That is what contracts are supposed to guarantee. But what if the other party does not hold up their end of the deal and leaves you to face the consequences?

Though frustrating, unfair, and unfortunate, this scenario is not uncommon. But it is not hopeless. With the help of a Houston business litigation attorney from Berg PC, you can fight to recover your losses and hold the negligent party accountable for breach of contract.

Damages for Breach of Contract

There are different damages you may be entitled to following a breach of contract. In some cases, contract language establishes the consequences if one party fails to fulfill their part of the deal. Even if your contract does not include that information, an experienced breach of contract attorney in Houston will help direct your case and work toward fair compensation.

Compensatory Damages

As indicated in the name, “compensatory” damages compensate a party harmed by a breach of contract for their losses. Compensatory damages can be general or specific.

In pursuing general compensatory damages, you seek to recover direct losses sustained from the breach. For example, downhole drillers depend on their mud suppliers to deliver orders on time. If those suppliers fail, the driller has to purchase mud from another source – usually at the last minute. The rushed timing may make the purchase more expensive as the driller cannot negotiate a price and is thus required to pay extra for the rushed order. In seeking general damages, the driller may pursue:

• A refund of the money already paid to the mud supplier for the original order
• The difference between the amount of the original order and what the new supplier charged
• Reimbursement for the expense of sending the late, and now not-needed, mud back to the supplier

Special damages are also called “consequential damages.” They cover losses caused by the breach of contract that are not ordinarily predictable.

For example, if you, as the plaintiff (the non-breaching party), lost earnings, sustained damage to your reputation, or lost business opportunities because of the defendant’s contractual breach, you may be entitled to special damages.

Special damages may also apply when there are “special conditions” related to your contract. A party planner may order tents for a weekend-long outdoor bash. When those tents do not arrive on time, the planner has to rent tents to cover the delay. Those rental fees may be included as special damages as long as the party planner can prove the original tent company knew of the specific circumstances, in this case, the dates for the party, upon entering the agreement.

Liquidated Damages

Liquidated damages means the amount owed is readily ascertainable. If a company sells a drill bit for $100,000 and the buyer picks up the product but never pays, damages are clearly at least $100,000 – plus pre- and post-judgment interest and attorneys’ fees. Those damages are “liquidated.”

Specific Performance

When specific performance damages are applied to a breach of contract case, the terms of a contract are legally enforced after the breach has occurred. The remedy for the breach is to force the breaching party to honor that original deal. For example, if a property seller enters a contract agreement with a buyer and then refuses to sell, the buyer may seek specific performance damages to continue with the purchase.

A Houston breach of contract lawyer will help you decide if seeking specific performance damages is in your best interest. It is important to consider why the breaching party failed to uphold the deal, whether this remedy will cause the defendant harm or force them to act against their will, and / or if enforcement is impractical, among other issues.

Injunction

Injunctions serve the opposite purpose of specific performance where a party is ordered to act in order to fulfill the contract through specific performance. Under an injunction, a court may order a party not to act.

Employees must often sign non-compete agreements. For example, a salesperson who separates from a company may be bound by a non-compete. If the salesperson takes a job in sales with a competitor, a court may enter an order preventing the former employee from engaging in competition in violation of the employment contract signed with the former employer.

Injunctions can be temporary or permanent. Temporary injunctions may be ordered as the case is litigated to protect against further potential damage. Permanent injunctions are part of a final decision.

Rescission

Rescission allows the non-breaching party to back out of the contract legally. The contract is canceled, and both parties are restored to their pre-contractual situations. Rescission generally does not involve the pursuit or payment of monetary damages, though it may include an award of attorneys’ fees.

For rescission to apply, the breach has to be material to, or go to the heart of the contract. If you are a caterer, you may demand partial payment by a specified date. If the party who booked you does not pay, rescission likely applies. You can be released from providing the catering services agreed upon in the contract.

Considerations When Claiming Damages After a Breach of Contract

Several factors come under consideration in breach of contract cases, and each can influence the success of the case, including but not limited to those listed below.

Transparency

It is essential for the terms and conditions of a contract to be transparent or clear. The contract must clearly establish each party’s roles and responsibilities, as well as timelines, deliverables, benchmarks, standards for quality, performance indicators, methods of communication, and all other relevant factors.

Expectation

If expectations are not clearly established in a contract, it is hard to enforce them. If you claim a vendor, employee, service provider, or someone else has breached a contract by failing to meet expectations, you must prove that claim. It is not possible to do that if expectations are not defined.

Legality

You can only claim breach of contract if the contract in question is legal. The contract must comply with relevant laws and regulations for the jurisdiction. In addition, for your case to be heard, you must file a breach of contract lawsuit within the statute of limitations or legal deadline. In Texas, the deadline for filing breach of contract claims is generally four years from the date of the breach.

Defenses To Allegations of Breach of Contract

There are defenses to claims of breach of contract. For example, claims can be filed too late, contracts can be legally invalid, the breach may have occurred because of circumstances beyond the breaching party’s control, and / or the contract may have been signed under duress. These, and other situations, may lead to a claim’s dismissal.

Contact a Houston Breach of Contract Lawyer

When involved in a breach of contract case, you need an experienced attorney guiding your claim and fighting for you. Reach out to the Houston breach of contract lawyers at Berg PC to get the help you need. Our skilled attorneys will provide bold representation so you can reach a favorable resolution.

Disclaimer: The information provided in this article and on this blog is for general educational and informational purposes only. It is not legal advice and should not be relied upon as a substitute for consultation with a licensed attorney regarding your specific situation.

The post Types of Damages for Breach of Contract – What You May Be Entitled To appeared first on Berg PC.

Taking action when a conflict of interest in a Houston business occurs is essential. Addressing these conflicts is best approached at the beginning of the relationship to prevent future hardships and disputes.

Refer to Established Agreements

Successful businesses have a plan for worst-case scenario situations. A business partnership agreement is essential to navigate times when even the most solid partners are not on the same page. Employee handbooks and stakeholder guidelines are other ways to clearly define what is expected and inappropriate in the business relationship.

These moral and ethical missteps can damage a business’s reputation, financial stability, and its very existence. Partners in a business relationship are the fiduciaries of each other. Fiduciary duties include the duty of:

• Good faith
• Loyalty
• Care
• Full disclosure

Clearly outlining fiduciary duties in a partnership agreement is vital. Our legal team can ensure your contracts are appropriate and help you when conflict arises.

Recognizing a Conflict of Interest

A Texas business conflict of interest occurs when a partner, stakeholder, or employee seeks personal gains over a company’s best interests. Their actions often lead to unbiased decisions and poor judgment, poorly affecting the business or company they are connected with. These actions can have legal consequences if they are carried out, but staying aware of these conflicts can prevent them from occurring, providing valuable protection for your business.

Common Business Conflicts of Interest

Again, addressing these common conflicts of interest in a business agreement defines acceptable business practices and ensures a pathway for resolving these conflicts effectively.

Self-Dealing

Using knowledge of a company’s financial standing or accessing business finances for personal gain instead of the best interests of a business and / or its clients is one of the most prevalent conflicts of interest. This conflict of interest involves illegal actions.

Insider Trading

Buying or selling the securities of a company that are publicly traded while benefiting from information that is not public knowledge is considered insider trading.

Competing Employment

Working with another business or organization directly competing with a business or owning a competing business refers to outside employment. Including non-compete agreements in business partnerships can address this conflict of interest before it becomes a problem and address the steps to be taken if it occurs.

Gifts

Items given as gifts from a company can be used to influence business partners in their purchasing decisions. These purchases may often incur more expense for a business when more affordable options are available, but as reciprocation for the gift, the partner chooses the company’s product.

Gifts often seem harmless but can be costly to the business. Ensuring a system of checks and oversight in purchasing is essential to prevent gifts from becoming a conflict of interest.

Nepotism

Another common conflict of interest is hiring or favoring family members to perform a role in a business or utilizing the services of a family member’s business to supply services or goods to the business without actively seeking out other services or goods that may provide more benefits or be more cost-effective options for a company. Government entities generally prohibit this practice, and many businesses have policies preventing it.

Addressing a Conflict of Interest in Business

Establishing partnership agreements at the inception of business has been mentioned. Critical clauses to include that can address conflicts of interest include:

• Dispute resolution procedures and disciplinary actions
• A summarization of potential conflicts of interest and a means of resolving each
• Each partner’s decision-making powers
• Acceptable forms of compensation and benefits
• Non-compete clauses
• Dissolution guidelines

Conflicts will happen in a business relationship. Successfully navigating these conflicts takes preparation and work.

Never Procrastinate

Addressing a conflict of interest can be uncomfortable, but sweeping the issue under the rug can be damaging to the partnership and the business. Identify the problem and have a conversation about concerns. Offering possible solutions helps find resolution.

Work With a Mediator

A mediator should be skilled in working through conflict resolution, offering unbiased ideas and creative solutions to the problems that can be solved and serving to prevent the same issues from reoccurring. However, some of the conflicts of interest mentioned are illegal actions that could pose legal risks for other partners when the behavior is not dealt with immediately.

Seek Legal Representation

Hiring personal legal representation is vital for guidance and protection in Texas business conflicts of interest. When couples divorce, each spouse retains personal legal representation to speak for their needs. In a business partnership, this legal relationship should be developed as part of entering into a business to protect your best interests throughout the relationship.

There are essential services a Houston commercial litigation attorney can provide. A review of all contracts by a commercial litigation attorney in Houston is a proven method to certify that needed clauses are included in agreements between business partners. This review can weigh the equality in contracts and identify loopholes that can become problematic. Legal representation during partnership disputes and mediation interventions can buffer emotionally charged interactions.

When laws have been broken, or a business relationship is beyond repair because of a business conflict of interest, a Texas commercial litigation attorney will assist you with the complex decisions that accompany a business divorce to help you navigate beyond the current business relationship into a successful business future.

Exceptional Legal Guidance in Houston Commercial Litigation

Efficiently working to correct a business conflict of interest prevents problematic behaviors from spilling over into a business, destroying the hard work and dedication that has gone into building a successful company. Secure your business’s future by working with a dedicated team of Houston business litigation attorneys who stand beside you in accomplishing your goals and building a more substantial organization. Berg PC will diligently tackle any concerning business matter or conflict of interest.

Disclaimer: The information provided in this article and on this blog is for general educational and informational purposes only. It is not legal advice and should not be relied upon as a substitute for consultation with a licensed attorney regarding your specific situation.

The post What Happens When There is a Conflict of Interest in Business appeared first on Berg PC.

Fiduciary relationships arise in a number of business contexts. When a business fiduciary fails to perform the duties imposed upon them by law, a breach of fiduciary duty has occurred, and the damaged party may bring a claim to recover compensation for their losses.

The following discussion gives three examples of how fiduciary duties in business relationships can be breached and explains what fiduciary duties are and when they arise.

3 Examples of Breaches of Fiduciary Duty in Business Relationships

For a breach of fiduciary duty to give rise to a claim for damages, the fiduciary’s conduct must either cause damage to the person being represented or must inappropriately benefit the fiduciary.

1. Partner’s Breach of Fiduciary Duty to Partnership

The Texas Business Organizations Code says a partner is liable to other partners and the partnership for harm caused by violating a duty imposed by the Code. Partners owe duties of care and loyalty to each other and the partnership. Partners are to discharge their duties in good faith and in the best interests of the partnership.

Partners must account to the partnership for benefits received by a partner on behalf of the partnership and may not engage in conduct adverse to the partnership. A partner does not violate a fiduciary duty merely by acting in the partner’s own interest, though such conduct will be carefully scrutinized.

Some of the ways partners can violate their fiduciary duties to the partnership and other partners are:

• Engaging in business transactions in which a partner has a personal financial interest
• Pursuing business opportunities individually that would have benefitted the partnership
• Using partnership funds to pay for personal expenditures
• Failing to provide an accurate financial accounting to all partners
• Not dividing partnership profits according to the partnership agreement

2. Corporate Executives Breach of Fiduciary Duty to Shareholders

The directors of a corporation are in charge of overseeing the control and direction of the business. Their decisions on behalf of the company’s shareholders and directors’ duties must be discharged in good faith, with ordinary care, and in a manner reasonably believed to be in the corporation’s best interests.

When the motive of a director’s actions is questioned, the inquiry focuses on whether the director acted with the intent to benefit the corporation. A corporate director does not have a duty to never make a mistake. Business decisions that otherwise comply with a director’s duties do not give rise to liability. An error in business judgment, if reasonable and well intended, is not a breach of fiduciary duty.

Directors can get into trouble when they or those they are related to benefit from dealings involving the corporation. Types of actions that can breach a director’s fiduciary duties include:

• Transacting business with another corporation the director has a business or financial affiliation with
• Personally profiting from any corporate transactions
• Taking a business opportunity that would benefit the corporation
• Engaging in business transactions benefiting family members
• Making decisions adverse to corporate interests

3. Financial Advisors Breach of Fiduciary Duty to Clients

As stated in the Texas Administrative Code, financial advisors in Texas owe quite a few fiduciary duties to their clients. Financial advisors are required to be competent and work toward improving their competency. They are not to advise clients about matters outside their particular areas of expertise and must obtain qualified assistance or refer a client elsewhere.

Financial advisors must perform their services with honesty, integrity, skill, and care. They are to remain objective and free of any interests that conflict with a client’s interests. There is no conflict of interest in situations where a financial advisor fully discloses the conflicting interest to the client, and the client expressly permits the relationship to continue.

The professional activities of a financial advisor specifically cannot involve:

• • Dishonesty
  • Fraud
  • Deceit or misrepresentation
  • Knowingly making a false or misleading statement to a client

What are Fiduciary Duties?

A fiduciary has a legal duty to put the interests of the party being represented before their own when acting in a fiduciary capacity. When acting as a fiduciary in Texas, the following duties are owed to the person whose interests are being represented:

• Duty of care
• Duty of loyalty
• Duty of good faith
• Duty of confidentiality
• Duty of obedience

When a Fiduciary Duty Can Arise

Whether a fiduciary duty exists is determined by the relative positions of the parties in a particular type of relationship. Where one party is relying on the knowledge, skill, or experience of another for help, a fiduciary duty exists as to the vulnerable party’s needs.

Some fiduciary relationships arise as a matter of law, and others can be established from the facts of a particular relationship. Common business associations where a fiduciary relationship exists between professionals or between a professional and a client include:

• Business partners to each other in a partnership
• Agent to principal
• Corporate directors to shareholders
• Trustee to trust beneficiaries
• Lawyer to client
• Financial broker to client
• Executor to estate beneficiaries
• Employer to employee – only when a fiduciary relationship can be established
• Employee to employer – if the employee holds a key position or possesses critical business information
• Insurance company to the policyholder – this special relationship arises out of the unequal bargaining power between the parties.

How to Know if a Fiduciary Duty Has been Breached

Breaches of fiduciary duty are violations of trust in relationships where the law requires strict standards of integrity. When inappropriate conduct is suspected of a fiduciary in business relationships, it may be difficult to determine whether a fiduciary duty has been breached or a negative outcome is only the product of poor business judgment.

A consultation with a Houston business litigation attorney at Berg PC will help clarify your legal rights.

Disclaimer: The information provided in this article and on this blog is for general educational and informational purposes only. It is not legal advice and should not be relied upon as a substitute for consultation with a licensed attorney regarding your specific situation.

The post 3 Examples of Breaches of Fiduciary Duty appeared first on Berg PC.

These contracts are usually part of your standard employment agreement, but what impact can they have on your freedom to change jobs and advance? What happens if you break a non-compete? Let’s examine some common questions and how your decisions surrounding non-compete agreements might affect your career.

Understanding Non-Compete Agreements

A non-compete clause is included as part of a contract or legal agreement stating that the employee cannot take a job at any of their former employer’s competitors when they leave the company. The agreements typically include language forbidding disclosure of any confidential or proprietary info to any third party, even if that party is not working with or employed by a competitor.

These clauses typically restrict the worker for between six months and two years. The goal, from the business’s point of view, is to keep employees from gaining knowledge and training, then taking that directly to a competitor. Because this can limit where an employee may work for the duration of the agreement, employers may be required to provide a salary during this period.

Each agreement will vary depending on the demands of the employer, so it’s highly recommended that you have a contract attorney look at it before you sign. Remember that companies are more interested in protecting their financial health and trade secrets than taking care of you when you separate from their employment.

Are Non-Compete Agreements Enforceable in Texas?

Texas is an employment-at-will state, meaning you have the right to leave your job at any time, and your employer can terminate your job (with a valid reason). Even with this policy in place, non-compete contracts are nearly always enforceable in Texas.

They are legally binding, and breaking one can result in legal action against you from the employer. These agreements must meet certain conditions, however, to be considered reasonable. These conditions include:

• The agreement must be part of another enforceable agreement, such as your contract for employment.
• It must spell out a reasonable scope of activity.
• It should be reasonable in the geographic area it covers. For instance, it shouldn’t include parts of the state, country, or world where the employer does not have competition.
• The contact must have a reasonable duration.

When deciding if your non-compete is enforceable, a court will examine whether the agreement is overly broad or restrictive for you. The employer will need to prove that not enforcing the contract will harm its business interests. The employee will need to show how the agreement unfairly limits their ability to make a living in their field of practice.

Is My Non-Compete Agreement Valid if I am Fired?

Non-competes are still valid even if you’re fired from your job. The agreement is more focused on what happens after you leave an employer, regardless of the circumstances, so it still applies. Whether you were let go for legally invalid reasons is another matter, such as if you were discriminated against or retaliated against.

However, there could be complications that allow you to escape the confines of a non-compete agreement. This all depends on how and why you were fired, as well as any existing precedents for cases like yours. For example, if you are terminated in a way that violates your protected rights under various employment laws, you could file a claim with the Equal Employment Opportunity Commission (EEOC).

You may have several options or none, and it all comes down to how your non-compete was written. Each case will be unique, and an experienced contract dispute attorney can help you understand your possible avenues for relief.

What Happens if You Break a Non-Compete Agreement?

Non-compete agreements are meant to protect everyone involved. Employers have a legal fallback for keeping their unique knowledge from being unfairly shared. Employees can receive compensation for avoiding competitors for a specific period of time. However, some individuals may be tempted to break their non-competes out of spite for a former company or due to desperation to find work.

If you feel your non-compete agreement is overly burdensome, you can work with an attorney to dispute the terms of the contract and attempt to release yourself from it. However, simply breaking the agreement outright puts you at risk of legal action from your former employer. When that happens, you’ll need qualified legal guidance and representation from a team who understands the nuances of Texas employment and contract law.

You can potentially claim certain defenses, such as the employer breached the contract and you are no longer bound by it, or it was overly broad. With a thorough investigation, your Houston non-compete lawyer may find that the company engaged in illegitimate business affairs, thereby casting doubt on the validity of an agreement with them. Again, each case is unique and must be examined closely.

Get Help Understanding Your Non-Compete Agreement Today

Just like any legally binding contract, the nuances of non-compete agreements can vary widely. They may be valid and fair, or they could unreasonably restrict your ability to earn a livelihood after you leave your employer. Understanding how your situation should be handled takes skill and a strong background in interpreting Texas employment law.

When you have concerns or questions about your non-compete contract, reach out to the Houston business litigation lawyers at Berg PC. Our team of top-notch Houston business litigation lawyers has successfully litigated non-compete claims on behalf of employees through every stage of the process. We will review your agreement and advise on how best to proceed, and we can help you if you’ve been accused of breaching the contract.

We can educate you on the full process, from how long your case may take to what costs you can expect to bear. Our team believes in protecting the rights of those who have been treated unfairly, and we can work with you to develop a reasonable fee structure according to your situation. To learn more and get started, contact our non-compete lawyers to schedule a consultation.

Disclaimer: The information provided in this article and on this blog is for general educational and informational purposes only. It is not legal advice and should not be relied upon as a substitute for consultation with a licensed attorney regarding your specific situation.

The post What Happens if You Break a Non-Compete appeared first on Berg PC.

1. Failure to deliver the expected service;

2. Failure to deliver the expected goods;

3. Failure to complete the job;

4. Failure to make a payment;

5. Performance was below the agreed standards;

Types of Breach of Contract

Actual Breach vs Anticipatory Breach

An actual breach occurs when any party has not done what they agreed to do when they agreed to do it. An anticipatory breach occurs when a party indicates a decision not to perform their responsibilities at a future date.

Material Breach

A material breach is a failure of performance that affects the purpose of the contract and makes it impossible for the non-breaching party to receive what was agreed to. For instance, if there is an agreement to buy a truck and the seller delivers a car, the buyer is excused from paying for the wrong vehicle.

Non-material Breach

A non-material breach does not alter the purpose of the contract and generally does not excuse the parties from performing. For example, if the agreement is to buy a red truck with a tan interior and the seller delivers a red truck with a silver interior, the buyer is still required to pay for the truck but may be entitled to damages for the breach.

“Minor” Breach of Contract

The materiality standard recognizes the principle that some breaches are so minor that they may not make any difference in whether you get what you expected under the terms of the contract. In legal terms, there is such a thing as a de minimis breach or offense. There are some “wrongs” that may simply not matter in the scheme of things, even when someone has technically not fulfilled their contractual obligations.

The fact that a minor breach may not be material does not give the non-breaching party license to freely disregard the terms of the contract. That said, it may be that a series of non-material or minor breaches can add up to a material breach that could entitle a party to monetary damages.

A series of non-material or minor breaches can add up to a material breach.

A court would look at several factors to determine whether you can receive compensation for an immaterial breach. In general, if you have suffered damages from the breach, you can sue for damages regardless of the materiality or severity. In one common example, a supplier could deliver materials on April 2 when the contract required them on March 31. Two days late could have different consequences in different situations. In many cases, the court would take a “no harm, no foul” approach, especially if you did not suffer any damages as a result.

However, two days late could also be material in a way that would entitle you to financial compensation. For example, if you were relying on the delivery for an event that was scheduled on April 1, a delivery on April 2 would be a significant problem. You may be forced to scramble and pay higher prices for an alternative source of supply. In that case, the breach is almost certainly material and the breaching party would need to pay your damages.

Determining if the Type of Breach Requires Legal Assistance

Contracts are how business gets done. Each party to a contract wants something the other has to offer. They agree to do certain things so that each can get what they want. If the other party has breached a contract you entered into with them, you are in a difficult position. There are times where you must take action on your own but you need to make a quick judgment about whether the breach was material. Your choice will have significant consequences. It is hard to know how a court would rule on the matter if there was a breach of contract lawsuit.

If you mistakenly claim that a breach was material and use that as grounds to not perform your end of the contract, you could be the one in legal jeopardy if the court does not agree with you about the breach’s materiality. In other words, you could be ordered to pay for what you received under the contract even if it was not exactly what you were supposed to receive according to the contract’s terms. Worse still, you could be on the hook for a breach of contract if you did not do what was required of you under the contract because you thought the breach would get you off the hook for your obligations.

Disclaimer: The information provided in this article and on this blog is for general educational and informational purposes only. It is not legal advice and should not be relied upon as a substitute for consultation with a licensed attorney regarding your specific situation.

The post 5 Examples of Breach of Contract appeared first on Berg PC.

Understanding How BEC Attacks Work

Business Email Compromise (BEC) is a type of scam that involves a criminal impersonating a legitimate party in an email to trick a company into transferring funds to a fraudulent account. A BEC scam begins when the perpetrator pretends to be one of the victim’s trusted contacts. Usually, the scammer poses as a vendor, a colleague, or even the victim’s boss to create an email account compromise. The sender, who is running the email threat to the account, asks the recipient for a wire transfer and changes the bank’s details for future payments.

Since business email account compromise attacks do not employ malware or hostile URLs, the normal lines of cyber defense do not pick up on the scam. BEC invasions make use of impersonation tactics that make their victims open up to them and give them the personal information they are trying to score. They will often incorporate what looks like a legitimate email account into the attack, making the scam more believable.

Social engineering can be an effective impersonation technique. They may use a known domain or fake a website so that they appear authentic to their intended victims. BEC attacks are challenging cybercrimes to investigate since they must be done manually.

Investigations can be arduous because of the nature of social engineering. Sensitive information is exchanged, including the following:

• Email account
• Bank accounts
• Wire transfer information
• Phone numbers

By garnering sensitive data through attorney impersonation, false gift cards, invoice schemes in which fake invoices are sent from a fake finance department, and fraudulent bank accounts, scam artists are able to gain access to personal data and are able to create a hard-to-stop and hard-to-catch crime because of these vulnerabilities.

Types of BEC Scams

BEC leans on social engineering to execute the scam; it does not require a lot of tools to work. These scams are easy to repeat and are not hard to access, so they have become a widespread cybercrime. There are a few BEC techniques that seem to be very fairly typical.

By recognizing what these scams include, you can educate yourself and your employees about what to expect and how to circumvent them.

Using Trusted Relationships as a Tool to Exploit

When you see a familiar person or entity in your email inbox, your first instinct may be to respond promptly. The attacker is counting on this, as your response is the portion of the scam that they are relying on. This type of exploitation happens in various ways.

They may pretend to be a work colleague that is sending a request for payroll details using CEO fraud. The email may look as if it is an invoice from a vendor. Or it could be a charity you support soliciting a donation.

Copying Your Normal Workflow

Many times, organizations have commonly used workflows that are often automated and executed via email. These often become rote after employees repeatedly do them. Cyber attackers realize that common workflow habits become mindless after a while, and they capitalize on this.

By replicating typical workflows that are used daily, BEC swindlers rely on victims acting without processing what they are actually doing, and giving them the information, they are after.

Workflow can be compromised in the following ways:

• Requests for password resets
• Feigning an attempt to share spreadsheets, files, or folders.
• Emails that appear to be sent from apps that are commonly used requesting access

Questionable Attachments

While malware or ransomware is often avoided because it can be detected easily, BEC attacks use fake invoices and social engineering techniques to make the emails seem legitimate. By doing this, they act to lure their victims into the scheme.

The fishy attachments make the emails seem less like a scam, or that is their aim, at least.

Social Engineering

Often BEC emails use subject headings that are overly familiar or that make the reader feel a sense of urgency that would lead them to take action quickly and without overthinking. They use keywords and phrases to do this in the subject of the emails.

Some common things you might encounter in BEC emails include the following:

• Requests
• Overdue balances or payments
• Personal greetings, “Hi Mark!” or “Hey Hillary!”
• Offers of payments are a good way to get your attention in their minds
• “Immediate action required” creates a very real sense of urgency for many people
• “Important information” from your company’s CEO

By using tricky language to make what seem to be harmless requests, they can also find an inroad to your account information.

Free Software

Cybercriminals sometimes use widely available software to make their BEC scams seem more credible. Because of the software, the emails are not flagged by the technologies that would usually grab bad links and domains.

Phishing emails, spoofed emails, and ransomware are all often used by attackers to gain the information they are trying to find. Even if an email looks genuine, the lesson is, it may not be. By utilizing widely used software, these scams can enter under the radar.

BEC Scam Example

Here’s how it works: ABC Company owes a vendor, Beta Corp, $100,000. ABC and Beta have done business together for years, so an invoice in this amount is not unusual. ABC Already has Beta’s banking information.

As ABC’s accounting department is preparing to wire the funds, Chris Jones, ABC’s accounts manager, receives an email from Pat Smith, Beta’s accounts manager. Again, not unusual – they communicate frequently. Pat’s email says there’s a problem with Beta’s main operating account at Worldwide Federal Bank, and Beta needs ABC to wire the funds instead to another of its accounts, this one at Global Federal Bank, and provides the account information.

Chris complies and sends a wire to Global Federal Bank “for the benefit of Beta Corp re: invoice number 6892” in the amount of $100,000.

Three weeks later, Chris gets a phone call from Pat asking why ABC has not yet paid. Chris responds that the money was sent as Pat requested – to Global Federal. But Pat made no such request, and Beta has no account at Global Federal. Chris pulls up the email from Pat and makes a crushing discovery: the email did not come from psmith@betacorp.com, Pat’s actual email address. It came from psmith@betacrop.com. The two are so similar you probably just compared them because you didn’t notice the difference. And anyway, Chris’s email system – probably Outlook – doesn’t display the address when emails arrive, it displays the name of the sender. Chris calls the FBI and is told to fill out a report at the Internet Crime Complaint Center (IC3). The FBI will investigate, but chances are by this time that money has been turned into crypto and sent halfway around the world to a country from which there is no escape. The odds of any of that money ever being recovered are as close to zero as possible.

ABC Company is not alone. According to the FBI, BEC is one of the fastest-growing, most financially damaging internet-enabled crimes. It is a major threat to the global economy. In 2021, the Internet Crime Complaint Center (IC3) received BEC-related complaints with claimed losses exceeding $2.4 billion. For context, the IC3 found yearly losses attributable to BEC actors were $360 million in the calendar year 2016. And $2.4 billion is just what was reported.

Legal Options After a BEC Scam

If hackers or scammers have perpetrated BEC fraud and other such cybercrimes against you or your business, these are the suggested actions you should immediately take:

• Notify your bank as soon as possible
• Contact your lawyer to advise you about your legal options
• Speak to law enforcement about cybercrimes
• The FBI has an Internet Crime Complaint Center that you should file a complaint with
• Inform management at your business or workplace
• The full extent of the scammer’s cybercrimes may become more evident once IT conducts a forensics investigation
• Reach out to your insurance company and detail what the hackers did and how you were scammed
• Schedule a consultation with an outside security specialist to determine the extent of what happened and how to prevent it from happening in the future
• If there were security policy violations, determine what they were and isolate them
• Consult with IT specialists about shoring up the security weaknesses that allowed for the hacking

These scams are prevalent and are hard to catch with average security measures. It is critical to your cybersecurity to initiate more defense levels to avoid these phishing scams altogether.

So, what does a company like ABC do? Chris made a mistake but wasn’t really at fault – his company, ABC, was the victim. What about Global Federal Bank? Doesn’t it have policies and procedures in place to make sure it isn’t providing banking services to criminals?

Banks May Be Liable in Business Email Compromise Attacks

Under the Uniform Commercial Code (UCC) and its state-specific variations, financial institutions may be held liable for “misdescribed” funds if they knew that the intended recipient did not match the name of the actual account holder. Several courts have held that receiving banks may be liable for their failure to confirm the intended recipient matched their customer:

• In Studco Bldg. Sys. U.S., LLC v. 1st Advantage Fed. Credit Union, 509 F. Supp. 3d 560, 568 (E.D. Va. 2020), the court found that “if the beneficiary’s bank knew about the conflict between the name and number and nevertheless paid processed the payment, then the bank could be in violation of” the relevant state version of the UCC.
• In 800 Columbia Project Co., LLC v. CMB Wing Lung Bank, Ltd., No. 821CV00278JLSADS, 2022 WL 17884221, at *7 (C.D. Cal. Sept. 19, 2022), the district court ruled that “banks must bear the loss for unauthorized orders unless those orders are verified in good faith pursuant to a commercially reasonable security procedure to which the bank and its customer agreed.”
• And in Sunset Cmty. Health Ctr., Inc. v. Capital One Fin. Corp., No. CV 22-1822 (JRT/LIB), 2023 WL 359674, at *5 (D. Minn. Jan. 23, 2023), citing the UCC, the court held that “a beneficiary’s bank cannot accept a payment order if the payment order misdescribes the beneficiary.”

If somebody tricked you into sending money to a bank that should have caught it, report it to the FBI – and let us know. Contact the Houston business litigation attorneys at Berg PC to discuss your case.

Disclaimer: The information provided in this article and on this blog is for general educational and informational purposes only. It is not legal advice and should not be relied upon as a substitute for consultation with a licensed attorney regarding your specific situation.

The post Business Owners Guide to Business Email Compromise (BEC Scams) and Bank Liability [2023] appeared first on Berg PC.

What is Considered a Material Breach in Texas

There are generally two ways that a party can materially breach a contract in Texas:

1. A party substantially fails to perform a term that is an essential element of their agreement
2. The circumstances, including the language of the agreement, the reasonable expectations of the parties, the standards and practices of the business, trade, or industry, and the character of the breach, indicate that (A) the breach caused or is likely to cause substantial harm to the aggrieved party; or (B) the breach substantially deprived or is likely to substantially deprive the aggrieved party of a significant benefit it reasonably expected under the contract

What Is Material Depends on the Circumstances of Each Case

We mentioned above that there are generally two ways that a party can materially breach a contract in Texas. But there is no one definitive resource in Texas law that describes in concrete terms when a breach will be material or gives all of the examples of a material breach.

Instead, materiality is determined by Texas precedent and common law. In other words, a judge will review prior Texas cases to reach their own conclusion about the facts of your case.

The Restatement of Contracts is a resource a judge may consult when deciding a lawsuit. According to the Restatement, the following factors could influence whether a breach of contract is material:

• The extent to which you will be deprived of the benefit that you had reasonably expected
• The extent to which you can be compensated for the part of the benefit that you were denied
• The extent to which the breaching party would suffer forfeiture for their failure to perform (courts are sensitive to imposing severe penalties that would far outweigh the transgression of the breaching party)
• The likelihood that the breaching party can cure their failure to perform (in other words, fix the problem)
• The extent to which the behavior of the party failing to perform or to offer to perform comports with standards of good faith and fair dealing

Standard of Materiality

The theory behind materiality in the context of a breach of contract is that it is still possible to get the benefit of the bargain from a contract even if the other party does not perform perfectly according to its terms. You may still receive what you were expecting, even if it is not a 100% match to what you expected based on the contract’s language. Thus, principles of fairness would keep the contract in place while allowing you to potentially recover damages for the other side’s non-compliance if you have suffered damages.

The standard of materiality is crucial for many reasons. Obviously, if the other party breached the contract, you may be able to successfully file a lawsuit for damages (assuming that you have suffered them). A material breach of contract could also allow you to get out of your own contractual obligations. You do not need to continue performing under a contract when the other party is in breach. However, you are taking a chance when you repudiate (that is, disregard) your own contractual obligations.

What is considered material will depend on the circumstances. While you have the right to insist on strict compliance with the contract, courts may draw a line that allows the contract to continue after some types of breach of contract. In other words, there are degrees of severity when it comes to a breach.

Materiality Issues

Repudiating A Contract Could Open You Up To Legal Risk

Materiality issues often arise in a lawsuit when one party engages another to perform work through a contract. One party has an obligation to perform the work, while the other party must pay them for the work that they do. The common fact pattern is that the vendor or contractor performs the work, but there is a minor flaw with it. The party with the obligation to pay may refuse to do so because they claim that the other party did not fully perform according to the terms of the contract. Then, a court would have to decide whether the breach was material in a way that would excuse the complaining party from having to pay for the services performed under the contract.

Legal Solutions for Material Breach of Contract

Your contract could already give some guidance about what could be considered a material breach. If an experienced attorney helped draft or review your contract, they may have even recommended that you specifically list in the contract the breaches that could be considered a material breach.

Breach of contract cases can be difficult, regardless of which party did not live up to their contractual obligations. Even the party that is damaged by the other’s breach may face their own legal risks regarding the contract. They will need to decide whether to keep performing their side of the contract under its terms in light of the other party’s failure to meet the contractual obligations they agreed to. If they make the wrong decision, they could be liable themselves for breaching the contract.

A Non-material Breach Would Still Entitle You to Damages

The general principle is that you are entitled to the bargain to which you have agreed. You have the right to insist on the performance of a contract’s essential terms. Otherwise, you are entitled to damages to make you whole. Your damages would reflect the losses you have suffered in your particular situation.

If you are experiencing any issues regarding failure to perform under the terms of a contract, you should consult with an experienced commercial litigation attorney who can advise you of your legal rights and remedies. You must act carefully before you make any decisions on your own because you could be the one who ends up paying damages. To speak with a lawyer, contact the experienced Houston business litigation lawyers at Berg PC today to schedule an appointment.

Disclaimer: The information provided in this article and on this blog is for general educational and informational purposes only. It is not legal advice and should not be relied upon as a substitute for consultation with a licensed attorney regarding your specific situation.

The post What is Material Breach of Contract in Texas? appeared first on Berg PC.

In this article we will discuss the steps to take during the dissolution process, some of the risks involved in choosing generic partnership agreements, potential disputes that may arise during dissolution, the cons of partnership litigation, and the necessity of partnership litigation.

Understanding the Legal Process for Dissolving a Partnership

There are times when you may decide that the best course of action is to dissolve your partnership. Other times, the decision may be made for you, such as when a court orders the dissolution of a partnership because the partners are no longer capable of working together. In other words, dissolution could be something that you choose on your own or something you have no choice about.

Dissolution could be something that you choose on your own or something you have no choice about.

Even when partners decide they no longer wish to be in business together, the partnership still continues to exist. There is a legal process that must take place before the partnership dissolves. During this process, you will need to be careful because you could end up personally liable for the actions of your other partner(s).

Risks of Using Generic Partnership Agreements

Hopefully, you worked with an experienced attorney before you signed the partnership agreement. The lawyer would have likely given careful consideration to the dissolution clause so that it would help you in your specific circumstances. That said, a partnership agreement cannot account for every single contingency. Moreover, some people may have tried to save money by using an “off-the-rack” partnership agreement that does them no favors and does not give any helpful guidance on dissolution.

Steps During the Dissolution Process

Once dissolution is agreed upon, or ordered by the court, there are several steps that you need to take to actually wind down the affairs of the partnership, including:

• Reviewing your permits and business registrations and terminating your licenses as necessary
• Filing the final federal and state tax return for your business and notifying the relevant authorities that you are dissolving your partnership
• Reviewing your partnership’s contracts to see if they can be terminated, or if you need to have special negotiations with the counterparties to wind them down
• Paying all outstanding debts and liabilities
• Closing your partnership’s accounts

You also need to go through the actual process of dissolving your partnership with the state where it is registered. A commercial litigation attorney who is familiar with Texas partnership law can assist with the actual paperwork. Your lawyer would also review your existing contracts to see if there are any additional steps that you must take to end them.

Review the Terms of the Agreement and Talk to the Other Partner(s)

Before deciding to dissolve your partnership, first speak with your other partner(s) to discuss the pros and cons of a dissolution. It could be that you are on the same page, so dissolution would be a matter of executing the steps laid out in the partnership agreement and handling the administrative matters of winding down the business. In a situation where there is no disagreement, you and your partner(s) can proceed directly to the dissolution.

In a situation where there is no disagreement, you and your partner(s) can proceed directly to the dissolution.

You will next have to review the language of your partnership agreement. The document may lay out specific steps that you and your partner(s) will have to take given your situation.

Possible Disputes During the Dissolution Process

There are several potential issues that could arise regarding a dissolution clause:

• The clause in the agreement may be bare bones or off-the-shelf, and it may not cover your specific situation
• There may be different interpretations among you and your partner(s) about the language of both the dissolution clause and the larger partnership agreement
• The partners may differ on how to execute the language in the dissolution clause and have different opinions about the actual process

Cons of Partnership Litigation

A dissolution can often become a negotiation among partners. They may have different viewpoints of what must be done. You should begin the dissolution process by getting clear about what your position is regarding the future of the partnership and what you want to happen. You should also be familiar with the language of the partnership agreement and how you interpret it in advance of any discussions with your other partner(s).

Ideally, the partners can work together to execute the steps specified in the partnership agreement, including meeting frequently and keeping their lines of communication open. If they have trouble speaking directly, they could communicate through their attorneys. Your lawyer may recommend that you pursue mediating the dispute if you and your partner(s) have trouble communicating with each other substantively and voluntarily.

The Necessity of Partnership Litigation

You May Have No Choice but to Litigate

In the best-case scenario, the parties will reach an agreement about dissolution. They would then proceed to draft a dissolution agreement that lays out the steps that will happen. You should carefully review any agreement before you sign it. Preferably, you should have an attorney draft the language of the agreement and/or review the agreement if another lawyer drafted it.

But if the partners cannot come to an agreement or work together, they can apply for a court-ordered dissolution. The judge can set the terms of the dissolution. Litigation can be expensive, and you would cede all control of the dissolution to a judge. You are taking a risk if you opt for litigation, but it may be necessary. In some cases, the judge could decide that the remedy to a business conflict between you and the other partner(s) is dissolution without you or the partner(s) demanding it. Courts may see that a group of partners just cannot work together, and they could act to put an end to the partnership.

How an Attorney Can Help You During the Dissolution Process

If you are involved in a partnership and have any legal issues, you should get the help of an experienced partnership attorney. Getting legal help early in the process can help you avoid some common pitfalls that can lead to litigation. Your attorney can do the following to help you with your partnership disputes and/or partnership dissolution:

• Review the language of the partnership agreement to determine your rights and obligations
• Help you act in the interim to protect yourself from liability
• Negotiate with the attorney(s) representing the other partner(s) to help carry out the dissolution
• Take your case to court if you cannot reach an agreement, so the judge can decide any disagreements
• Negotiate and deal with creditors if you have any outstanding debts
• Provide you with practical and timely advice, so you understand the dissolution process and its impact on you and your interests

When a Partnership Dissolves Contact The Attorneys at Berg PC

Get the Legal Help You Need

The partnership dispute attorneys at Berg PC work with business owners when they have potential litigation. We get involved at the beginning of the process to help you pursue the best possible result. Contact the Houston business litigation lawyers at Berg PC today if you have any partnership issues that require the help of a knowledgeable business attorney.

Disclaimer: The information provided in this article and on this blog is for general educational and informational purposes only. It is not legal advice and should not be relied upon as a substitute for consultation with a licensed attorney regarding your specific situation.

The post What Happens When Dissolving a Partnership? appeared first on Berg PC.