Business Buy-Sell Contract Breach Lawsuit

A contract breach lawsuit could be a good tool. It may lock-in financial terms and ease separation. Business partners can move ahead confident that they’ve taken the necessary steps to protect their investment even when the situation changes. But what occurs when 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 is unenforceable…


That had been the problem when two partners, in running a business and also in bed, arrived at the end in the road. For around thirteen years, Jill and Jack (not their real names) co-owned a limited liability company (LLC). Jill owned two-thirds in the 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 and had two children together. Jill lived on the Farm.

Things came crashing down after Jill traveled to family court. Alleging that in their relationship Jack had, “subjected her to a continuing campaign of physical, sexual, verbal and mental abuse,” Jill requested: (i) sole legal and physical custody of these two children; and (ii) a short-term order of protection requiring, amongst other things, that Jack avoid her and also the Farm. That took proper care of the personal end of things.

To get control of the organization, Jill wanted to buy-out Jack’s one-third in the LLC. Due to temporary order of protection, Jack was cannot browse the Farm, and unable to handle his business duties. Valuing the LLC property, assets and equipment at $806,000, Jill sent Jack a Letter offering to create “a lump sum payment payment of $268,666” for Jack’s one-third. Jack would must also agree with other terms and conditions, including “a requirement that [he] not get into any farming operation or reside within twenty miles of 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 the offer Letter. Jack also included some additional terms and conditions, including “reduc[ing] the purchase price by $1,100 to mirror cash which he taken from the LLC's safe.” The Buy-Sell Agreement ended with all the following language, “[Jack] believes this agreement can be a faithful representation of matters formerly addressed, and affixes his signature below to affirm his acceptance of the agreement.” Before sending Jill the agreement, Jack signed the agreement “in the existence of a notary.”

Sometime Jack got cold feet. After Jill had her attorney translate the Buy-Sell Agreement in to a “Membership Interest Purchase Agreement,” Jack hired an attorney to examine the investment 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 included in an endeavor to force him out of the LLC,” probably didn’t help. After waiting several months, Jill brought a lawsuit to make Jack to respect the organization Buy-Sell Agreement and then sell on his share of your LLC.

Forcing Compliance with Buy-Sell Agreement

To achieve her goal, Jill asked a legal court to grant “specific performance.” Nyc 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 managed to convey property, but didn’t; and (iv) there is no other adequate remedy at law. Specific performance might only be awarded when there is a legitimate existing contract. Montgomery Troy LLC v Vassell, 52 Misc.3d 1219(A) (Sup. Ct. Kings Cnty. 2016). Jack argued that this business Buy-Sell Agreement symbolized his need to continue negotiations. Not “a final and finish contract.”

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