Ykhjuy

How good a friend is she? If the partner's attitude is something that may cause future problems for the business I would suggest mentioning it to her and what gave you concern.

Outside of that, I would just leave it with "After meeting with your partner I don't think that I would be the best fit for this project".

"No." is a complete sentence.

Despite the mantra from Hollywood, a good attitude, kindness, generosity, etc... tends to make one more successful in business. Given a preference, people would rather not do business with a bombastic personality. You should not feel guilty about feeling this way.

Saying something like:

The project may have merit, but Johnny is not the kind of person I like to do business with.

This should be seen as kind and might help her understand that choosing the people we work with is an integral part of keeping sanity at work.

Just speak your truth. Let your friend know that speaking to her business partner made you uncomfortable and that you feel that working with him will present an undesirable challenge to you. If she's your friend, then she'll understand and thank you for being up front about it. If she's NOT your friend, she'll become offended or try to push you into doing it anyway.

Sometimes all the money in the world isn't worth the headache of dealing directly with a crappy client. Kudos to you that you've recognized this early. So now it's time to stick to your guns and let your friend down gently.

“Sorry, I don't think it's a good fit.”

You are probably going to have issues if you either give excuses, or much more detail. Keep it short and minimize the space for things to go bad. That's all you might need to say—and might be what's best.

If it's a friend that told you about the contract...Well you probably should tell what happened as a friend rather than as a professional.

Tell her what happened and why you don't feel like working with this person since you don't feel there's gonna be a match. Be careful to properly choose your words, you might go like :

He seemed kind of aggressive while talking and wanted to constantly remind me that I owe him the contract, which felt odd, so I don't think this is going to work out, except maybe if I get to work with someone else on the contract.

I think saying, "I don't think this project will be the right fit for me." is answer enough. Then, if your friend asks for the why of it, that opens the door for elaboration.

If you're open to working with someone else within the organization, as you indicated above, I'd note that as well. Doesn't mean they can't bait-and-switch you once they get you on board, so I might specify the points of contact in the contract.

How can I diplomatically inform her that I am rejecting their project due to her partner's attitude?

If you must mention the reason behind your refusal, then consider the following:

Thanks for taking the time to discuss project XYZ with me and introducing me to your business partner. While the project is interesting, during the meeting with your partner I found that our style of communication doesn't mesh well, and I don't believe I'm a good fit for this role in your team. Thank you for the opportunity, and good luck in your endeavor!

It conveys what you want - that the issue isn't with the project, but with the existing team - without speaking negatively of any individual. Obviously she doesn't have this issue, so calling him out as a jerk, or someone with a bad attitude isn't her experience, or if it is she's learned how to transcend such communication patterns and still get work done.

Even if it is a significant problem, or if he's truly a jerk or has a bad attitude, you don't necessarily want to call it out, partly due to your limited experience with him, but also because it's not your place to ruin their business relationship.

Do I even need to mention about his attitude, or just say no to her without any further justification?

You do not need to mention the real issue. If she digs for a reason then you may want to bring it up, depending on your level of familiarity with her, but there's also the issue where she may be bringing a project to you for your benefit. She may not actually need you, and it is possible that her partner is unhappy with the situation and was unable to completely hide it during the discussion.

Thanks for meeting with me about your project. I'm not going to be able to accept it, but I wish you luck with it!

There's no need to volunteer more information. If she really, really wants you to work on this project she will press for more explanation, and after a discussion it's possible you may come to an agreement you can both live with (that involves less contact with the other person, perhaps).

If she's doing you a favor she will drop it immediately, unless she's a close friend and is really interested in helping you out financially - then she'll probably press for more info, but directed towards your financial state and what you plans are to rectify it.

Because you can't ask her directly to just sort it out somehow, means she's not your friend but an acquaintance. This changes things a bit. It means that no matter how you sugar-coat the "No" it's her partner and there's a chance it won't go smoothly with regards to future references. That is, you are essentially delivering a message that it's his "personality" that you dislike, and if they are friends, (and most likely they are very close) you can (or worse - can't) guess how a person with that kind of attitude will receive it.

This project most likely has a time-frame, and if you've 100% decided to decline, then perhaps you are not able to free up your current schedule to take this project at this time.

Another alternative is "drama surcharge". Don't mistake this for some sort of "retaliatory" measure. If you have two clients with similar projects, yet one requires much more of your time/energy than the other. Wouldn't it be fair to charge extra for this? (Of course, without explicitly mentioning this) You are not selling lumber. You are offering services of your mind, where you and your product are one. Some people have no understanding/respect for that. The more difficult the client, the higher should be the surcharge they pay. It's quite fair, just like working overtime and getting paid extra rate. Don't be afraid to incorporate this surcharge into your total quote. Of course if this interaction severely impacts your self-respect/feelings maybe it's not worth it no matter how much extra you charge.