12 WARNING SIGNS YOU’RE HEADED FOR A LAWSUIT WITH YOUR PARTNER JEFFREY H. LERMAN
that is the person who has the most, hard dollars in the deal. If that is not possible, consider agreeing upon a
neutral third party upfront, to be the tie-breaker vote and make that vote binding. If that is not possible, include a
mandatory mediation clause in your agreement.
#6: Previous Bad Track Record of Partner
If your partner has a bad track record (failed businesses, failed partnerships), that is a warning sign that they will
continue in the same path. Sure, people can change. But if you are playing the odds, the odds are that a past
bad track record will repeat itself in some way, shape or form in your experience with that partner. Ask your
prospective partner about their business history. If you are already “in bed” with your partner and you do not
know this information, it is not too late. Ask. If you do not like what you hear, do your best to mitigate whatever
risk you learn about based on their prior history on a going-forward basis.
#7: Partner Has No Track Record
If this venture will be the first time your partner is trying this business, odds are they will
make mistakes while learning the business “on your nickel”. Their mistakes can translate into disagreements
and disputes with you. Be careful. Generally, it may be better for you to let them create a positive track record
before joining forces with them.
#8: Not Using A Lawyer, Or Using An
Inexperienced Lawyer To Handle
Documentation Of The Deal
If you have no written
agreement, that is another
major warning sign that you
are walking through a
minefield blindfolded and
headed for disaster
All too often, we see in our office, agreements that
were drafted by non-lawyer clients who were trying to
save a buck (on transactions involving millions of
dollars no less!), or by lawyers who were outside their
core area of expertise. That can, and frequently does,
result in disputes arising from a defective document.
Solution: Always, always, always hire a competent
lawyer to draft these important documents. The
investment will pay for itself many times over in the
savings you will hopefully realize in not having to pay a
litigator later to prosecute or defend against a lawsuit.