Navigating Commercial Entanglements in Friendships: Legal Remedies and Solutions

When friendships become commercially entangled and contracts are breached, rest assured, not all hope is lost! Our recent case highlights the complexities that can arise when personal relationships intersect with business interests.

Case Overview: Friendship to Business Partnership

We were recently instructed in a case whereby a friendship developed into a business relationship, and substantial sums were invested by one party into the other's property development business. No formal contract was ever drawn up, and much reliance was placed on email and message exchanges. The Defenders claimed that as the funds were invested directly into their Limited Company, they were not personally liable to repay the loan to our clients. In this case, the court was asked to objectively ascertain the intention of the parties and to determine what a reasonable person would have had in mind in the same situation.

Parties first met through mutual employment, became friendly, and thereafter developed a business relationship where, in effect, one became an investor in the other's business. Unfortunately, things did not go smoothly, and the investor ended up out of pocket to the tune of a substantial sum.

Key Legal Considerations

Arguments were made as to the status of the relationship between the parties and the extent of the obligation to repay.

There are various remedies available for breach of contract, which include (but are not limited to):

Recission: the "undoing" of a contract between parties, intended to reinstate parties to as close to the same position as they were in pre-contract,
Rectification: the correcting of mistakes made in recording agreements to make the document conform to the true agreement of parties, and
Financial compensation: the harmed party can claim monetary damages; these damages should place that party in the same position that they ought to have been, but for the breach of contract.

We were pleased on this occasion to obtain a court order for our client for the full sums they were due in respect of the investment (and not just the sums loaned/invested).

Preventing Contractual Disputes

While judicial recourse is available, pre-contractual steps are encouraged to avoid such disputes. Contracts should be meticulously drafted to avoid ambiguity. Clearly drafted contracts should include every obligation, deadline and penalty. You should avoid the inclusion of undefined timelines, conflicting clauses, vague performance obligations and unclear payment terms.

Expert Guidance for Contractual Disputes

Navigating contractual disputes can prove challenging, however, you do not have to go through it alone. Our dedicated team of contract experts are here to offer personalised guidance tailored to your unique circumstances and practical solutions every step of the way. We take the time to understand your needs and work closely with you to achieve your desired outcomes.