A supplier contract that quietly cut two partners out of the venture

The situation

The email had nothing to do with Parminder originally. A mutual acquaintance forwarded it to him by mistake, thinking he already knew, and the subject line referenced a supply agreement between a packaging distributor and a company Parminder had never heard of, run by Zoltan. The terms in the attached contract matched, almost line for line, a deal Parminder and his friend Sukhwinder, a letter carrier, had spent the better part of a year putting together on the side of their day jobs.

Parminder worked at a factory; Sukhwinder delivered mail. Outside those jobs, the two of them had formed an informal joint venture two years earlier to import a niche packaging product and resell it to small businesses across the GTA. It was modest in scale but growing, growing enough that the two of them had recently started paying a neighbour's teenager by the hour on weekends to help with packing and local deliveries, and they had brought in Zoltan, an acquaintance with distribution contacts, as a third contributor to help secure a supplier relationship neither of them could reach on their own. The three had never signed a formal partnership agreement, working instead on a handshake understanding that whatever business Zoltan's contacts produced would be split three ways.

The forwarded email showed that Zoltan had gone to the same distributor Parminder and Sukhwinder had spent months courting, and signed a supply agreement in the name of a company that listed only himself. There was no venture split in it at all. The deal, once operational, would route the exact opportunity the three of them had built toward, worth an estimated $60,000 to $90,000 in the first year alone, entirely to Zoltan.

Before coming to us, Parminder had spent several weeks trying to sort it out based on advice he found in online forums for small business disputes, which told him informal partnerships had few real legal protections and that without a signed agreement he likely had no recourse at all. Discouraged, he nearly let it go, and the delay meant Zoltan's new agreement had already been operating for close to two months by the time Parminder finally sought actual legal advice.

Sukhwinder, when Parminder finally told him what the forwarded email showed, was angrier than Parminder expected, and also more resigned. He had raised a concern about Zoltan handling the distributor relationship alone almost a year earlier, worried about exactly this kind of scenario, but had let it go when Zoltan brushed it off as unnecessary formality between friends. That earlier conversation, half-remembered and never written down at the time, became one of the first things we asked him to reconstruct in as much detail as he could.

What the review found

The online advice Parminder had absorbed was wrong in an important way. It is true that an informal joint venture without a written agreement is harder to prove and enforce than a properly documented partnership, but 'harder to prove' is not the same as 'no recourse.' Ontario law recognizes that people who work together toward a common business purpose, sharing effort, risk, and an understanding of shared reward, can owe each other duties even without a signed contract, particularly where one person is entrusted to act on behalf of the others in dealing with a third party like the distributor.

Our review focused on reconstructing what the three had actually agreed to, since nothing was in writing. We pulled together the messages between Parminder, Sukhwinder, and Zoltan over the prior two years, records of expenses the three had split, and communications with the distributor itself showing that Zoltan had been introduced, and had introduced himself, as representing the joint venture rather than acting alone. That last point turned out to be central: several early emails to the distributor referred explicitly to 'our team' and 'the three of us,' language Zoltan had used himself before quietly switching to a solo company once the deal was close to signing.

That pattern supported a claim that Zoltan owed the venture a duty not to take, for his own benefit, an opportunity that came to him because of his role within it, sometimes called a duty of loyalty or a fiduciary duty depending on how the relationship is characterized. Taking a venture's opportunity for yourself, when you were entrusted to pursue it on the venture's behalf, is a recognized wrong even where there is no written partnership agreement to point to.

The two-month delay before Parminder sought advice was not fatal, but it mattered. It meant Zoltan's new arrangement with the distributor had operated long enough to generate real revenue and to become somewhat entrenched with the supplier, who now had an operating relationship with Zoltan's company that would be inconvenient to unwind. That made a negotiated resolution, rather than an attempt to unwind the contract entirely, the more realistic goal.

We also had to be candid with Parminder and Sukhwinder about a genuine weakness in their position: because nothing had been reduced to writing at the outset, Zoltan could argue, and eventually did argue through his own counsel, that the arrangement had always been looser than the two men now described it, and that his role with the distributor had grown organically into something more independent over time. That disagreement about the venture's original scope, not just about what Zoltan later did, was always going to be part of any negotiation or, if it came to that, any trial.

What we did

1. Reconstructed the venture's history from informal records. Because there was no written agreement, we assembled two years of text messages, emails, and shared expense records between Parminder, Sukhwinder, and Zoltan, cross-referenced against dated bank transfers for shared costs, to establish in detail that a real joint venture existed and what each person's understood role and share had actually been from the outset, not just in Parminder's recollection of it.
2. Identified the language showing Zoltan acted on the venture's behalf. We located the specific early communications with the distributor where Zoltan referred to the venture collectively, using phrases like 'our team' and 'the three of us,' which became the clearest evidence that the opportunity had come to him in that capacity rather than as an independent actor pursuing his own deal from the very start, undercutting the looser account he would later give.
3. Sent a formal demand letter setting out the claim. The letter to Zoltan laid out the fiduciary duty argument plainly and in careful detail, attached the supporting communications we had located, and demanded a full accounting of the revenue generated under the new supply agreement along with Parminder and Sukhwinder's proportionate share going forward, giving him a defined and reasonable window to respond.
4. Advised against attempting to void the distributor contract outright. Given how long Zoltan's arrangement had already been operating and how entrenched it had become with the supplier, we recommended against seeking to unwind the supply agreement itself, which would have been costly, legally uncertain, and disruptive to a distributor relationship that everyone, including Parminder and Sukhwinder, still had reason to want to preserve for future business. The stronger and more realistic position was recovering value from Zoltan directly.
5. Opened a structured negotiation rather than filing immediately. We proposed a settlement framework built around a lump sum reflecting the profit already diverted plus an ongoing share of future revenue for a defined period, giving Zoltan a clear, calculable alternative to litigation before we filed anything with the court, which kept costs down for our clients while the conversation continued.
6. Prepared a claim in parallel to preserve leverage. While negotiating, we drafted a full statement of claim setting out the fiduciary duty breach in detail, particularizing the 'our team' communications and the timeline of Sukhwinder's early, dismissed concern, so that once Zoltan retained his own counsel it was obvious litigation was genuinely ready to proceed on short notice if the negotiation stalled or if his position hardened rather than softened.
7. Reviewed the settlement terms for enforceability. When Zoltan's side eventually proposed terms, we checked carefully that the payment schedule, the future revenue-sharing formula, and the mechanism for verifying the distributor's actual sales figures were specific and measurable enough to be enforced later without another dispute over what the numbers meant, rather than letting the group settle into a second handshake understanding after everything they had just been through.

The outcome

Zoltan settled before a claim was ever filed in court, agreeing to pay Parminder and Sukhwinder a combined lump sum in the mid five figures reflecting the profit already generated under the diverted supply agreement, along with a defined share of future revenue from that same distributor relationship for the following eighteen months. The figure landed below the full estimated first-year value of the opportunity, reflecting the genuine cost and delay of trying to unwind an operating arrangement two months in, and the real risk both sides faced in a court fight built around an unwritten agreement and competing memories of how it started.

Parminder and Sukhwinder did not recover the relationship with the distributor itself, which remained with Zoltan's company going forward once the eighteen-month revenue-sharing period ended. That was a real concession, and not a small one financially, but it was one they accepted deliberately once they understood how entrenched the arrangement had already become and how uncertain, expensive, and slow it would have been to try to displace it entirely through litigation rather than through a negotiated share of the value it produced.

The three men did not continue working together afterward, and the friendship between Parminder and Zoltan did not survive the dispute either, which Parminder said was its own kind of loss separate from the money. The eighteen-month payment schedule was honoured on time, verified against the distributor's sales figures as the agreement specified, without further disagreement once it was underway.

For Parminder, the more lasting outcome was simpler than the settlement figure: he and Sukhwinder put a written partnership agreement in place for their next venture, something the earlier arrangement had never had, specifically so that roles, contributions, and what happens if one partner brings in an opportunity on the group's behalf would not be left to memory and goodwill again.

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