Business Partnership - Oral Agreement

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Old Jan 29th, 2008, 06:51 PM   #1

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Default Business Partnership - Oral Agreement

My husband and I started a consulting business with two friends of ours and we had an oral agreement in place as they refused to sign a written agreement. To me, this should have been a sign of things to come, but I trusted their friendship.

The agreement was that we would split all profits 50/50. We needed very little start-up money as we just needed computers for each of us and we billed our clients for all travel and expenses for the consulting that we were doing.

Business went well for the first few months, but I noticed that my partner had poor work ethics, such as billing clients for high priced dinners that were unecessary ($75 dinners with excessive alchohol purchases, etc.). He also wasn't very good at doing the work. I would end up doing most of the work, while he surfed the internet and did other non-client related work.

He was supposed to be the sales person. I let everyone know upfront that I wasn't a salesperson. Business slowed down, and every opportunity I had I would contact my business partner to find out how leads were going and tried to get him to work with me on writing a business plan and find some direction for our business. All of these discussions ended without any movement forward with anything.

My husband was then contacted by my business partner and he asked us to join them for dinner. All through dinner I expected the discussion to get back to where was our business going, but it never did. As we were leaving the restaraunt, my partner said something in passing about maybe bringing someone on to help with marketing/sales. He didn't ask my opinion, he just made a statement and got into his car.

The next day, my husband found out that two people that my business partner and I used to work with quit their jobs and told everyone that they worked with, that they were going to work with my business partner. I thought that was odd, but kept quiet, as I was waiting to see what happened next.

My husband then got a phone call 3 days later again inviting us to dinner. We showed up to dinner and there was my partner, his wife and these two people that had just quit their jobs. After dinner arrived, I was then told by each person what their role was going to be in the company as they were now Directors of the company and that I was a management consultant.

My business partner then invited me over to their house and basically told me I was no longer a partner and that I would be paid $100 an hour for consulting jobs that I worked on.

I confronted the two new guys and told them that I was one of the founders of the company and wanted to know what my business partner had promised them. I was told by them both that they were going to be getting a percentage of the profits.

I then confronted my business partner on this and wanted to know if he had intended to do this from the beginning and he denied it, but deep down I know he did.

What can I legally do at this point? Is the verbal agreement that my partner had with me still valid? Can I go after 50% of the profits and require him to buy me out? Or am I just out of luck and now made to learn my lesson about written vs. verbal agreements?
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Old Jan 31st, 2008, 01:32 PM   #2

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Default Re: Business Partnership - Oral Agreement

The oral agreements are still binding.

You have to try to show that agreements existed through whatever evidence you can if you end up in court on this.
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