From Collaboration to Conflict: When Business Disputes Arise
What Happens When Your Joint Venture, Business Partnership, or Informal Collaboration With Another Business Turns Sour?
An increasing amount of businesses across the world, and here in Queensland, are collaborating with other businesses.
These types of collaborative relationships are very common these days, whether it’s GoPro & Redbull, a social media influencer who has entered into an agreement to promote a business and attend events, or your local coffee shop teaming up with a surf shop down the street.
This recent trend should come as no surprise, as there are many benefits to businesses collaborating.
Some of these benefits include:
- Collaborative relationships provide both businesses the opportunity to create unique events which attract large crowds (ie, your local coffee shop doing ‘pop up’ events at a classic car dealership);
- Collaborative relationships may reduced costs if they involve splitting expenses (ie, marketing, rent, equipment, etc);
- Collaborative businesses help grow each company’s networks and clients organically;
- Collaboration provides each business with the opportunity to get the attention of people they would have otherwise not had to opportunity to engage;
- Collaboration can often me used to promote a business’ awareness of important causes, including the environment or other important social issues (ie, by collaborating with a ‘green’ company, etc).
However with each business collaboration comes a certain amount of risk. In some cases, the collaboration may not be as profitable as originally anticipated, and one party might decide to withdraw from the partnership early. In most cases, personalities clash and both business owners encounter problems that they did not originally anticipate or plan for.
Business disputes between both parties may also arise when:
- There is disagreement as to how the collaboration is to be carried out (or modified);
- There is disagreement over profit sharing (which usually occurs when one partner has an inflated view on the value of their business or contribution);
- There is a disagreement in relation to both financial and non-financial contributions (ie, ‘blood, sweat, and tears’) made by each party;
- There are allegations of the misappropriation of monies, also known as ‘unauthorised profit taking’;
- There are allegations of breach of statutory or fiduciary duties;
- There are allegations of a breach in the terms of the partnership agreement (whether the agreement is in writing or was verbally made);
- An employee of one business unlawfully using the confidential information, client lists, or ‘know how’ of the other company.
Where there are allegations of illegal conduct by either party (ie, dodgy accounting practices, unauthorised profit taking, theft, etc) it is extremely important that both parties obtain legal advice. Even the innocent party in that situation can get into legal trouble if their conduct is interpreted as a threat to contact the police for some other benefit.
In most cases, disagreements between collaborative businesses can be quickly resolved and without the need for Court with the assistance of solicitors or by participating in a mediation. Sometimes, both business owners will be so emotionally involved in that matter, that they fail to see the obvious solution to settling the dispute.
When a dispute arises in relation to a collaboration between two businesses, it is important to obtain legal advice early in order to resolve the matter quickly and on a commercial basis whilst minimising potential losses.
The approach to resolving disputes with two collaborating businesses will often depend on whether a written agreement exists, and the legal relationship between the parties (ie, partnership, joint venture, strategic alliance, limited term contract, etc).