Massachusetts Contracts and Partnership Agreements Need to be Fully Understood Before Signing on the Dotted Line
A recent Massachusetts Appeals Court case examined the issue of fiduciary duty and contract law in a commercial real estate dispute arising between general partners and limited partners.
The case involved, “…various transactions by the general partners, including their purchase, without the involvement of the limited partners, of large real estate parcels neighboring the building project for which the limited partnership was formed….”
The Court found. “As the limited partnership agreement expressly allowed the general partners' actions, we affirm the judgment rejecting all the limited partners' claims.”
See Slip Opinion 07-P-422 Appeals Court, Robert L. Fronk, Jack Saltiel and Maila L. Walter v. John P. Fowler, Jeffrey A. Millman, Robert Lee Wolff, Jr., Maple Leaf Cambridge Corporation, and The Cambridge Company, Inc.
Several cases were cited that should be considered when entering a contract or any business venture: "the obligations of the parties are determined by reference to contract law, and not by the fiduciary principles that would otherwise govern." Chokel v. Genzyme Corp., 449 Mass. 272, 278 (2007). See Blank v. Chelmsford Ob/Gyn, P.C., 420 Mass. 404, 408 (1995) ("questions of good faith and loyalty with respect to rights on termination or stock purchase do not arise when all the stockholders in advance enter into agreements" concerning those issues); Sonet v. Timber Co. L.P., 722 A.2d 319, 322 (Del. Ch. 1998) ("principles of contract preempt fiduciary principles where the parties to a limited partnership have made their intentions to do so plain"). … "[W]here sophisticated parties choose to embody their agreement in a carefully crafted document, they are entitled to and should be held to the language they chose." Anderson St. Assocs. v. Boston, 442 Mass. 812, 819 (2004).
This case serves as a reminder that it’s important to have an agreement in writing, but also to fully understand the rights and duties the agreement creates. If you’re a business owner in Massachusetts, it’s unwise to think of contracts or agreements as just routine boilerplate language. You should question each provision and understand what it means for you and your business interests.
