What can make a partnership agreement fraudulent?

What can make a partnership agreement fraudulent?

On Behalf of | Jan 19, 2021 | Business Law |

When people draw up a partnership agreement, they need to provide complete and accurate information in their disclosures to the best of their ability. If one partner deliberately deceives the other(s), that can constitute fraud and make the entire agreement null and void.

That person can be subject to lawsuits by the other partners if their deception caused harm to them or the business. They may also be subject to lawsuits from employees, clients, suppliers and others.

What is an innocent mistake and what is fraud?

Not all inaccurate or incomplete information rises to the level of fraud. For example, perhaps someone forgot to list one of their investment properties or a bank account in their disclosures. That likely wouldn’t be considered fraud.

However, if someone intentionally overstates the value of their assets or doesn’t mention that they once owned a business under another name that went bankrupt, that probably would be viewed as fraud by a court.

What if the partners participate in the fraud?

Sometimes, both (or all) partners participate in fraud when drawing up their partnership agreement. For example, they might backdate the agreement to misrepresent the business as one that’s been around longer than it has. If the partnership agreement itself is fraudulent, they could be subject to criminal charges as well as lawsuits from those impacted by the fraud.

If you’ve found that your partner misrepresented themselves when you drew up your agreement, seek the guidance of an experienced attorney. They can help you void the agreement and, if necessary, take legal action against your partner for damages. If you’re facing accusations of fraud, it’s also essential to have an attorney on your side.