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Business Buy-Sell Contract Breach Lawsuit

A business buy-sell agreement could be a good tool. It might lock-in financial terms and ease separation. Partners can move forward certain that they’ve taken the specified steps to defend their investment even if the situation changes. But what goes on once the business buy-sell agreement gets triggered and things get ugly? One partner refuses to give up the goods - or worse - claims that this buy-sell agreement doesn’t exist or perhaps unenforceable…


That was the problem when two partners, running a business and in bed, came to the conclusion from the road. For at least thirteen years, Jill and Jack (not their real names) co-owned a limited liability company (LLC). Jill owned two-thirds of your LLC and Jack owned other one-third. The LLC owned a 500 acre farm that produced organic goat cheese, straw and hay. On the top of operating the farm LLC, Jill and Jack also cohabited on occasion along with two children together. Jill lived around the Farm.

Things came crashing down after Jill traveled to family court. Alleging that throughout their relationship Jack had, “subjected her into a continuing campaign of physical, sexual, verbal and mental abuse,” Jill asked for: (i) sole legal and physical custody of these two children; and (ii) a temporary order of protection requiring, among other things, that Jack stay away from her and also the Farm. That took care of the individual end of things.

To obtain control of this business, Jill chose to buy-out Jack’s one-third of your LLC. Because of the temporary order of protection, Jack was not able to check out the Farm, and struggling to handle his business duties. Valuing the LLC property, assets and equipment at $806,000, Jill sent Jack a Letter offering to produce “a lump sum payment of $268,666” for Jack’s one-third. Jack would also have to say yes to other stipulations, including “a requirement that [he] not enter into any farming operation or reside within twenty miles in the [Farm].”

Buy-Sell Agreement or Offer to barter?

Apparently agreeing to Jill’s offer Letter, Jack responded which has a Buy-Sell Agreement. The Buy-Sell Agreement contained a great deal of what Jill had proposed in her own offer Letter. Jack also included some additional terms and conditions, including “reduc[ing] the purchase price by $1,100 to reflect cash that he removed from the LLC's safe.” The Buy-Sell Agreement ended using the following language, “[Jack] believes this agreement can be a faithful representation of all matters formerly addressed, and affixes his signature below to affirm his acceptance of this agreement.” Before sending Jill the agreement, Jack signed the agreement “in the existence of a notary.”

Sooner or later Jack got cold feet. After Jill had her attorney translate the Buy-Sell Agreement right into a “Membership Interest Purchase Agreement,” Jack hired an attorney to check the purchase agreement. Jack’s attorney came back with items that he thought were not in Jack’s favor. Jack’s feeling that Jill’s “claims of abuse were fabricated within an attempt to force him out from the LLC,” probably didn’t help. After waiting a couple of months, Jill brought a lawsuit to force Jack to respect the organization Buy-Sell Agreement then sell his share from the LLC.

Forcing Compliance with Buy-Sell Agreement

To complete her goal, Jill asked the court to grant “specific performance.” New York courts may grant specific performance when: (i) one party substantially performed its contractual obligations; (ii) was willing capable to perform its remaining obligations; (iii) along with the other party was able to convey property, but didn’t; and (iv) there is absolutely no other adequate remedy at law. Specific performance may be awarded if you have a real existing contract. Montgomery Troy LLC v Vassell, 52 Misc.3d 1219(A) (Sup. Ct. Kings Cnty. 2016). Jack argued the business Buy-Sell Agreement symbolized his want to continue negotiations. Not “a final and finish contract.”

Before moving forward, let’s recap. Jill sent a Letter to Jack, offering to buy Jack out. Jack responds by turning the offer Letter in to a Buy-Sell Agreement. Jack si
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