Because of this I feel like I'm being deceived, I'm the designer/coder and he brought the idea. Problem is that he's so paranoid about his idea being stolen it's making me nervous about the project.
Should I bail and cut my losses, or is this normal?
We have contractual agreements but it doesn't seem to help the situation.
The paranoia of "my idea is being stolen" is the sign of a highly inexperienced person and also statistically speaking, the sign of someone who is unlikely to succeed. Your skills as a designer and implementer make you highly valuable to many non-technical founders, so you should consider yourself able to pick your partners, and not have to "settle." An idea is worth *nothing* without execution, so I'd suggest that you align yourself with a more experienced founder.
Happy to talk through this and more details in a call. I'd also caution you that a contract doesn't provide you full security against this person's deceitfulness or bad behavior.
Trust is the cornerstone of a working relationship. It's important to deal with this issue head on or the problem is likely to become exacerbated over time. You might consider hiring an executive coach to support your communication. We work with coaches frequently to help us navigate challenging waters. I would dive into the issue fully and see if it can be resolved to your satisfaction. If so, you might have a great future relationship. If not, you might seriously consider moving on. As you're working through this, consider what his issues are bringing up for you. Where is the learning opportunity for you? Every challenge like this is an awesome growth opportunity. Good luck.
Your company is only as healthy as your partnership. Time spent working on your partnership is an investment in your company. That said, check out David Gage's book, The Partnership Charter. http://www.amazon.com/The-Partnership-Charter-Start-Business/dp/0738208981 It outlines a process for threading your partnership back together. (It's brilliant and one I've used several times)
BTW, paranoid is a fairly common personality type. It is how some people view the world. (Don't take it personally.) Andy Grove, the former CEO of Intel, is a famous paranoid and it has served him and Intel well.
Whether or not you should bail depends upon how passionate you are about the business and how willing you are to work on both yourself and the relationship. If you love the biz and are willing to do the work, investigate your partners willingness to do the same and get the book. Good luck.