“Honesty is the best policy . . . when there is money in it.” – Mark Twain
Clearly, not everyone is honest with money matters. When it comes to a current or former business partner, there are specific steps to take in the attempt to recover money owed.
The first and most important step is to determine whether or not a written contract exists. Some contracts are only verbal, never written down, perhaps centering on a hand-shake or a “gentlemen’s agreement.” Although these types of contracts are valid, proving the terms of an unwritten contract is very complex and the results are tenuous at best. If you have a non-written agreement with your partner, and are owed money, you will want to contact an experienced California business litigation attorney to discuss your options.
If a written contract does exist, then the terms of that contract will control how the dispute is handled. Most contracts will designate the state where the dispute is to be heard, what laws govern the disputes, and whether arbitration or mediation is required before filing suit. Note that most states tend to uphold arbitration clauses found in valid contracts, as most courts want each party to come to the table and discuss their disputes before formally filing suit.
If your contract requires mediation or arbitration before filing suit, you should abide by the contract and begin with finding a neutral third party to facilitate the discussions. Even if your contract does not require mediation or arbitration, you will want to have a written or in-person discussion with the adverse party or parties before filing suit. Sometimes a misunderstanding can be resolved with simple communication and willingness to compromise. And solving a dispute in mediation or arbitration usually proves far faster and less expensive than filing suit.
If you are suing as an individual, not in the name of your business, and your partner owes you less than $10,000, you can initiate suit in California’s Small Claims Court. Small Claims Court does not allow for counsel for either party, so you and your partner will be representing yourselves in court. (Anyone may consult with an attorney prior to court, but the attorney cannot appear in court for any party). This may be advantageous as the proceedings are usually fairly quick.
However, if your claim is over $10,000 or your partner owes you more than sole proprietor business money, you cannot initiate suit in California’s Small Claims Court. You will be required to file in California Civil Court and proceed through a full trial for money damages based on your contract claims.
If you are suing because a written agreement was broken, you have 4 years to file after the agreement was broken, so do not delay. Call the experienced California business litigation lawyers at Andrew Ritholz Law.