Can My Business Partner Enter into a Contract Without Telling Me?

Business partners put a lot of faith in each other’s hand. Strong communication is one of the keys to building a successful business partnership in Florida. Indeed, poor communication can undermine any business relationship—and serious partnership disputes can arise. With this in mind, you may be wondering: Can my business partner enter us into a contract without telling me? The answer is “it depends”―the contract rights and responsibilities of the partner depend on the role in the business and the terms of any partnership agreement.

A Business Partner’s Contract Rights are Based on Law and Contract 

To begin, it is useful to understand that a business partner’s ability to enter a contract on behalf of a partnership depends on both law and contract (partnership agreement). Here is an overview of key points to know:

• Florida Law: In Florida, managing partners and general partnership typically have a legal right to enter into contracts on behalf of the entire partnership—unless there is an enforceable contract (partnership agreement) stating otherwise. In contrast, limited partners typically do not have the authority to contract on behalf of the whole partnership.
• Partnership Agreement: Beyond Florida law, a business’s partnership internal obligations—those being their responsibilities under the partnership agreement—also matter as well. Theoretically, a partnership agreement could state that no partner can enter into a contract on behalf of the business without notice and consent from the others.

To summarize, a general partner or managing partner in Florida does typically have the right to contract on behalf of the whole business. However, that right can be tempered—or even eliminated—by a partnership agreement.

 A Contract Without Notice Could Be a Breach of Partnership Agreement or Fiduciary Duty 

When a business partner enters into a contract without notifying their other partner(s), it may constitute a breach of the partnership agreement—especially so if that written agreement stipulates that all partners must consent to such decisions. A breach of a partnership agreement can lead to serious disputes within the partnership. It could even operate the future operations of the company. The non-breaching partner(s) may have a claim against the breaching partner if the contract in question goes wrong and causes damages to the partnership business.

Beyond that, a partner entering into a contract without proper notice/consent of their fellow business partners might breach their fiduciary duty. Under Florida law, fiduciary duty requires partners to act in the best interests of the partnership. In Florida, business partners owe each other a limited fiduciary duty (a duty of care and a duty of loyalty). A business partner who violates their fiduciary duty may face liability.

 Contact Our Florida Business Partnership Dispute Lawyer

At Pike & Lustig, LLP, we are a boutique law firm committed to helping clients solve problems. If you have any questions or concerns about a partnership dispute—including one that arose because a partner—entered your business into a contract without notice—we are here to help. Contact us today for a completely confidential case review. We handle partnership disputes throughout the region, including Miami, Fort Lauderdale, Boca Raton, West Palm Beach, and Jupiter.