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Did my partner adhere to the law for loyalty and duty of care?

On Behalf of | Jul 18, 2022 | Business Law

Many Texas businesses are run by a partnership. This can be beneficial in many ways including combining skills, having increased access to capital, providing an opportunity to borrow more from lenders, sharing costs and giving motivation due to involvement in the business. However, there are also obstacles that can arise. If there is a dispute between partners, it can place the entire business in jeopardy.

Partners are legally obligated to behave in a certain way. If they violate the law, this could make it necessary to move forward with business litigation. When this happens, it is wise to have professional advice with addressing the lingering problems and finding a workable solution.

Partner conduct and duties under Texas law

When there is a partnership, state law requires that a certain level of conduct be adhered to. The partners are obligated to adhere to a standard of conduct. That means each partner owes the other partners a duty of loyalty and a duty of care. They must fulfill their duties in good faith and based on the best interests of the partnership. It is not a violation if they do not further their own interests in the partnership.

The duty of loyalty means that they must think about the partnership in terms of its property, its profit or benefits when the business is being wound up or from using the property in the partnership. The partner cannot work on behalf of anyone who is behaving adversely toward the partnership nor can they work adversely against the partnership themselves. The partner cannot compete against the partnership.

With duty of care, the partner must behave prudently. If they make an error in judgment, that will not constitute a violation of the duty of care. Simply being informed and complying with the law of general standards is sufficient to adhere to the duty of care.

It might sound like something from a televised drama to think that a partner is “double-dealing” or behaving in an inappropriate manner to suit their own interests, but it does happen in real life. The above laws are designed to set parameters as to how partners are required to behave. When they break the law, it can damage the partnership and steps may need to be taken in the legal realm.

Professional, creative and experienced help can be essential with business disputes

When there has been a violation of the law among partners, it can become a complicated situation financially, personally and professionally. Business litigation could be required to settle it. In addition to the violation of trust that needs to be present among partners, it has significant financial and personal ramifications unless it can be effectively dealt with.

For example, if money assets were misappropriated, it is better to consider legal options than to risk a confrontation that will only make matters worse. Regardless of the allegations, it is important for all parties to have legal guidance. This can be vital to settling the matter or clearing up misunderstandings so the business can survive and move forward effectively. Discussing the case with problem-solvers who are experienced, agile and knowledgeable can be helpful to try and forge a positive outcome for everyone involved and benefit the business.