How to Claim Against a Partner for Breach of Partnership Agreement

When a partner in a business fails to comply with the terms of a partnership agreement or their legal obligations, the other partners may be able to pursue a claim to recover losses or enforce rights. Claims against partners for breach of the partnership agreement or related duties are relatively common in commercial disputes in England and Wales, and this guide explains the legal framework, steps involved, possible remedies, time limits and practical considerations.

Introduction to Breach of Partnership Agreement

A partnership agreement is a contract between two or more people who carry on business together with a view to profit. It sets out the rights and responsibilities of each partner, including profit sharing, decision‑making, duties and procedures for key events such as retirement, expulsion or dissolution. A breach occurs when a partner fails to follow those agreed terms. In the absence of a written agreement, the Partnership Act 1890 implies terms into the partnership relationship.

Breaches can arise in many ways, including:

• Failing to contribute capital or share profits as agreed;
• Entering unauthorised transactions or acting outside the scope of the business;
• Misusing partnership assets;
• Competing with the partnership in breach of duties; or
• Violating specific clauses in the agreement.

Legal Basis for Claims

Contractual Basis

A partnership agreement is a contract between the partners. A breach of the contract gives rise to a claim for breach of contract, similar to commercial contract disputes in general. This means the innocent partner may seek damages for financial loss suffered as a result of the breach.

Fiduciary and Statutory Duties

Even where no written agreement exists, partners owe duties of good faith, loyalty and fairness to each other and to the partnership under the Partnership Act 1890 and established legal principles. A breach of these duties can support a claim alongside contractual breaches.

Court‑Ordered Remedies during Disputes

In some cases a partner's breach may justify a court order dissolving the partnership under section 35(d) of the Partnership Act 1890 if conduct makes it impractical for the business to continue. The court may also award compensation for losses caused by the breach.

Step‑by‑Step: How to Make a Claim

1. Review the Partnership Agreement and Legal Obligations

Before taking formal action, carefully review:

• The wording of the partnership agreement (if one exists) to identify the precise clause alleged to be breached;
• Any dispute resolution procedures in that agreement;
• Whether the Partnership Act 1890 applies where there is no written agreement.

A clearly drafted partnership agreement often includes steps such as negotiation, mediation or professional dispute resolution before court action.

2. Assess and Document Losses or Harm

Claims generally require evidence of loss. Keep records of:

• Financial statements, invoices, bank records and correspondence;
• Instances where the partner's actions deviated from contractual terms;
• Any direct financial impact on the partnership.

This evidence is crucial if the claim proceeds to litigation.

3. Attempt Negotiation or Alternative Dispute Resolution

Many partnership disputes are resolved without going to court by:

• Negotiating directly with the partner alleged to be in breach;
• Using mediation or another form of alternative dispute resolution (ADR);
• Employing the partnership agreement's internal dispute resolution process (if one exists).

ADR can be faster and less costly than litigation and preserves business relationships where possible.

4. Issue a Claim in Court

If negotiation and ADR fail, the next step is to issue a claim in the appropriate court:

• Most partnership disputes start in the County Court (for smaller commercial claims) or the High Court (for high‑value or complex cases);
• A claim form and particulars of claim must be submitted, outlining the contractual breach, legal basis for the claim, losses and remedy sought;
• You may seek damages, an injunction to compel or restrain certain conduct, or a declaration about the parties' rights.

A solicitor experienced in partnership and commercial disputes can assist with preparing court documents and strategy.

5. Engage in Case Management and Hearing

Once the claim is issued, the court will manage the case, which may include:

• Directions hearings setting timetables for evidence;
• Exchange of witness statements and expert reports (for valuation or accounting issues);
• A final hearing where both sides present evidence and legal argument to a judge.

The court's decision will determine whether the partner breached the agreement and what remedy should be awarded.

Remedies Available

Damages

The most common remedy is an award of damages to compensate for financial loss caused by the breach. Damages aim to put the innocent partner in the position they would have been if the breach had not occurred.

Injunctions

In some cases, an injunction may be appropriate to stop a partner from continuing harmful conduct, such as:

• Acting outside their authority;
• Competing with the partnership in breach of restrictive covenants.

Dissolution or Resolution Orders

Where the breach is serious and makes ongoing partnership impractical, the court may order dissolution of the partnership or other equitable remedies, including compensation linked to insolvency or winding‑up.

Time Limits and Limitation Periods

Under the Limitation Act 1980, most claims for breach of contract must be started within six years from the date of the breach (or twelve years if brought under deed). Delay can jeopardise the enforceability of a claim and complicate evidence.

Prompt action strengthens the position of the claimant and reduces the risk of lost evidence or faded recollections.

Risks and Practical Considerations

Joint and Several Liability

Partners can be jointly and severally liable for the actions of one partner, especially where conduct was authorised or within the ordinary course of business. This means the innocent partner may be liable to third parties even if another partner breached duties, and claims against partners may be complex.

Costs of Litigation

Court proceedings involve legal fees, court fees and possibly expert costs. The unsuccessful party may be ordered to pay part or all of the other side's costs. Early ADR can help manage costs.

No Repudiation Doctrine

Unlike some employment law contexts, the traditional doctrine of repudiatory breach does not apply to partnership relationships in the sense of automatically terminating obligations; statutory and contractual mechanisms are relied on instead.

Common Questions from our Readers

Can a partner refuse to negotiate before court action?
Yes, a partner may decline to negotiate. However, courts often view attempts at ADR favourably and may encourage parties to resolve issues outside litigation.

Is a written agreement always required?
No. Even without a written partnership agreement, partners can pursue claims based on implied terms under the Partnership Act 1890.

Can I claim personal losses separate from the partnership?
Claims typically relate to partnership losses. Personal claims require distinct factual and legal bases separate from the partnership's interests.

Key Takeaways

Claims against a partner for breach of a partnership agreement in England and Wales rely on contractual and fiduciary principles to protect the interests of the partnership. A claimant should start by reviewing the partnership agreement and evidence of loss, attempt negotiation or mediation, and, if necessary, issue a claim in the appropriate court. Remedies can include damages, injunctions, or dissolution remedies where conduct makes the partnership unsustainable. Time limits under the Limitation Act 1980 apply, and careful preparation and legal guidance increase the chances of a successful outcome in complex disputes.