My partner went AWOL and left me with the debt


In the excitement and time-intense process of setting up a new business, I made only a verbal contract with a trusted partner. When things didn't work out, he went AWOL, leaving me with all the costs we'd agreed to share.

The challenge

I was made redundant by my employer. In the weeks beforehand, however, a colleague and I had become quite close and started to identify a target market for a new software product to detect money-laundering in financial services. That seemed to hold potential, with some new legislation being the driver for the business.

When the redundancy happened I decided to spend three months trying to establish the business - and if that didn't work, I would spend all my time looking for a job.

I built a mock up of the product to explain what it would do and started visiting potential customers to get their feedback and hope to build a pipeline. Cold calling, sales calls and walk throughs. (I'm quite experienced in the IT industry.)

In parallel, I wrote the business plan and started looking for funding from friends, colleagues, networking, VCs. My colleague assisted, although he was still in full-time employment, making some sales calls, meeting up with me regularly and discussing the business often.

We agreed verbally (and here is the catch) that we would be 50/50 partners if we founded the business, and share the start-up costs 50/50 (not including my living costs) if we decided not to proceed.

After three months, we/I had expanded the mock up, written the business case, built a pipeline, found a development company (who I visited in Cape Town), agreed the funding and gone through due diligence with our investors. Then our lead customer withdrew. After that, bit by bit, things started to unravel. I called an end to the business.

When I tried to get my previously very enthusiastic colleague to pay 50% of the £12,000 costs we had incurred, I got absolutely no response to emails or phone calls.

The solution

I researched, and a friend who is a lawyer advised me (pro bono) on the small claims court procedures. I initiated proceedings.

As there was no written agreement between us (friends and verbal agreements etc), compiling the evidence took hours, but I did it and it was a very solid black and white case. Something like 300 indexed and referenced pages when all complete, plus copies for the other party and the court.

He never turned up for the first hearing, and objected to the finding which was in my favour, so we had two more hearings. A considerable amount of stress and worry for my wife and me (still not working at that stage) over the six months the process took.

I won the action and got my 50% back from him.

Key lesson

You can't always afford to get the lawyer in to draft a contract or policy or give advice. You simply don't have the funds or bandwidth to be squeaky clean on every action you take, so you prioritise and take the risk.

I made the judgement that he was reliable and would stick by his word (as I would). I was wrong. I only would have had to send one email outlining our agreement to save months of stress and delay.

Top tip

Make progress fast, but cover the most important exposures.

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