New York’s Highest Court Protects Business Partnership Principles

Filed in 55+ Housing, Construction Industry, Legal by on April 12, 2018 0 Comments

gavel and booksThe New York Court of Appeals in March issued a decision that provides clarity for New York business partnerships.

Congel v. Malfitano addresses partnership dissolution: The parties formed a partnership to own and operate a large mall in Poughkeepsie, NY. The defendant owned a minority interest (3.08%) in the partnership.

In 2006, Malfitano advised his fellow partners that he had decided to dissolve the partnership, claiming that there had been a fundamental breakdown among the partners. He claimed because the signed partnership agreement did not provide for a definite term of existence or duration, it was an at-will partnership and thus could be dissolved unilaterally under New York law.

However, while the partnership agreement did not provide a term, it did state that the partnership could be dissolved upon the election of a majority of the existing partners. Thus, the question for New York’s highest court, the Court of Appeals, was whether an agreement that provided dissolution conditions, but not a specific term, is an at-will contract.

NAHB participated as an amicus in this case because many of our members’ businesses are partnerships. Our argument was that partnership agreements should be enforced in accordance with their express terms.

The New York Court of Appeals agreed with our argument. The court held that the parties to the agreement clearly specified under what conditions the partnership could be dissolved. Thus, it was plainly not an “at-will” partnership that could be unilaterally dissolved by one partner.

For additional information, contact Devala Janardan.

 

 

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