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Current Developments in the Commercial Divisions of the
New York State Courts by Schlam Stone & Dolan LLP
Posted: October 2, 2018

Partnership Not Terminable at Will if Partnership Agreement Provides Otherwise

On September 25, 2018, the First Department issued a decision in Wiener v. Weissman, 2018 NY Slip Op. 06205, holding that a partnership was not terminable at will if the partnership agreement provides otherwise, explaining:

The individual plaintiffs and the plaintiff trusts are partners of general partnership plaintiffs 5400 Co., Absar Realty Company, and Absar Gerard Associates, formed in 1982 as single-asset real estate holding companies for the purpose of owning and operating two residential apartment buildings and a shopping center in the Bronx. On October 15, 2015, two of the partners issued a notice purporting to withdraw from and dissolve the partnerships, pursuant to New York Partnership Law § 62(1)(b), which, the notice said, provides that a partnership is terminable at will on notice.

. . .

New York’s Partnership Law creates default provisions that fill gaps in partnership agreements, but where the agreement clearly states the means by which a partnership will dissolve, or other aspects of partnership dissolution, it is the agreement that governs the change in relations between partners and the future of the business. Where, as here, a partnership agreement contains provisions governing the dissolution of the partnership by the will of the partners, ordinary contract principles apply, and a notice by a partner or partners to dissolve a partnership in contravention of the partnership agreement’s dissolution provisions is a legal nullity and does not effect a dissolution of the partnership. We note that, unlike Congel, the defendants here assert that their notice of dissolution was a legal nullity.

(Internal quotations and citations omitted) (emphasis added).

This decision relates to a significant part of our practice: business divorce (a break-up between the owners of a closely-held business). Contact Schlam Stone & Dolan partner John Lundin at jlundin@schlamstone.com if you or a client have questions regarding a business divorce.

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