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In any partnership, whether business or otherwise, it is not always steady sailing over the years. Disputes and other hurdles are always going to crop up at some point. Managing these disputes well will be critical to the success of your partnership. Ideally, you want to avoid disputes from occurring in the first place. But it is worth having some plans to resolve disputes that prove unavoidable. This article will set out three tips for avoiding and managing disputes in a partnership: 

  • having a plan for dispute resolution in your partnership agreement;
  • taking a proactive path through differences of opinions; and
  • getting third parties involved if needed.

Have a Detailed Plan for Dispute Resolution in Your Partnership Agreement

Every partnership should have a partnership agreement, which sets out a range of basic terms, roles and responsibilities for your partnership. As an example, it should cover:

  • the different roles of different partners; 
  • how the business will work and who is responsible for what; and 
  • what happens if a partner wants to leave the partnership. 

It should also have some detail for what happens if a dispute arises between partners: 

  • what process you will follow; 
  • if you will involve any third parties; and
  • what happens if you cannot resolve the dispute. 

Having this in your partnership agreement is advantageous so that you and your business partner both have a clear process to reference and follow, no matter what the nature of the dispute is.

It can also help to have something that you both clearly need to follow to resolve the dispute. Rather than have an additional dispute about what will be done to solve the main dispute, such as agreeing to bring in another party to assist. It is best practice to include a dispute resolution term in your partnership agreement for these reasons. 

Focus on a Proactive Path Forward for the Business

Disputes with business partners can be about any number of different things, from the management of your team to a disagreement about how to approach a negotiation with a new supplier. No matter what the dispute is about, your best bet at resolving it without escalation is by trying to focus on finding a productive consensus or agreeable solution with your business in mind. There are no points for winning an argument or debate with your partner and no reward for being ‘right’.

You should certainly keep the dispute from getting personal and make it about the business problem as much as possible.

The best way to do this is to think about what outcome, that your partner might agree with, is best for the business. If this is a compromise between your two positions, that may well be worth it in order to get you and your partner back on the same page. Be specific and try to craft a proactive plan forward, making overtures to your partner to show you are willing to compromise and that you still respect their opinion even though you disagree. Positivity is key and resolving a dispute in this way is certainly preferable to a sustained, protracted standoff. 

Get Third-Party Assistance if Required

Finally, if you and your partner simply cannot reach an agreement about how to best get through your dispute or disagreement, it may be time to get assistance from a third party. Ideally, you would set out a plan for this in your partnership agreement. The most used kind of third party for disputes between partners is a mediator. A professional mediation will give you and your partner a chance to say your side of the story and explain why the dispute is happening. A skilled mediator can set things out in a non-confrontational and objective way and help achieve a resolution between you and your partner. 

It can sometimes be incredibly helpful to have a third person privy to the dispute who has no emotional or vested interests in the outcome of the disagreement. Mediators and other dispute resolution experts also have the benefit of having seen many kinds of disputes in their line of work. Therefore, they can bring that experience to bear when resolving the dispute in your own business. 

Key Takeaways

While it isn’t practical or realistic to avoid all disputes in a business partnership, there are tactics and plans to assist with managing disputes as effectively and peacefully as possible. These should start with your partnership agreement, which should have a specific clause for dispute resolution that can set out some certainty and clarity when disputes arise. Another good idea is to focus on extracting a practical and proactive outcome from the disagreement. Finally, a mediator can help get partners past the worst of a disagreement. If you want to know more about avoiding disputes within your partnership or managing disputes when they do arise, contact LegalVision’s business lawyers on 0800 005 570 or fill out the form on this page.

Frequently Asked Questions

What is a partnership agreement?

A partnership agreement should set out the basic terms of a business partnership, such as the roles and responsibilities of each partner, what happens when a partner wants to leave the partnership, and also dispute resolution processes. This can help set out a plan in advance for issues between business partners.

Can a mediator help with partnership disputes in New Zealand?

Yes, mediators can be an excellent help with resolving disputes between partners. Having a third person be able to sort through issues and come up with consensus outcomes objectively can help achieve a breakthrough if a resolution proves otherwise hard to come by.

Can a mediation in a partnership dispute be held confidentially?

Yes. You can set the parameters around the mediation when your partnership contacts and makes the arrangement with the mediator. In general, mediators operate on a basis of strict confidentiality in any case.

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