Legal Question in Business Law in Canada

Re: Dissolving a Contract

If your contract is in writing, then the answer depends on what it says. If it is not in writing, well, then you may have a difficult time establishing exactly what each party's rights and obligations are.

The term "retainer" usually implies that it is non-refundable, so hopefully you will win on that basis if he takes you to court. (This should be a small claims case.) Also, because you started doing the work, you should be able to recover the reasonable value of your services from the client. This may even be more than what you have received, so you might be able to sue him and get more money.

He has no right to demand that you do the work at a price less than was agreed upon, though he surely does have "the right to ask", as you put it.

Re: Dissolving a Contract

The first question here should be what body of law applies to the interpretation and enforcement of this contract. Your question implies that it may be "non-U.S." Since I practice law in California, my answer will assume California law applies, but that may not be the case.

Next, one does not ordinarily "dissolve" a contract. They can be breached, performed, sometimes terminated, sometimes rescinded, maybe replaced through a novation, and the Uniform Commercial Code uses "cancel," but "dissolve" is not a term that fits in the contract-law lexicon.

As a final preliminary matter, I note that you are partners in a business that is rather closely related to the contract. The special duties and responsibilities the law imposes upon partners (including fiduciary duties of loyalty, disclosure, fair dealing, etc.) may (but does not necessarily) have an impact upon the interpretation and enforcement of the contract.

OK, if this went to trial, I think the most likely outcome would be:

(1) You do not have an enforceable obligation to perform services. This is partly because the full retainer has not been paid, and its payment is probably a condition precedent to your duty to perform. It is also because you could not be ordered to specifically perform a contract of this type.

(2) You do, however, have an obligation, if you are not going to perform, to return the portion of the retainer already paid you, except:

(3) You may keep so much of the retainer as represents the fair value to the other party of services actually rendered. The value is from the other party's viewpoint, i.e. if you performed services but didn't deliver work, or the value to the other party was nil because the project was abandoned or changed, you would not be entitled to keep any of the retainer.

(4) The contract is not invalid on account of partial payment of the retainer. It is a valid contract (ceteris paribus) that has been breached.

(5) There may be a genuine issue as to which of you is the breaching party -- he because he hasn't paid the retainer in full, or you because he "substantially performed" the condition precedent of paying a $1,325 retainer. I think you win this, but a mere $22 shortfall could be considered "de minimis."

(6) If any of the dishonesty you allege affects the formation of the contract, it may be invalid (void) due to fraud, but this requires careful legal analysis.

You can unwind this mess by making restitution of the advance, withdrawing from the partnership, and getting a full release as to all matters, with indemnity against partnership debts. A local lawyer could handle this for you.