Partners facing dissolution claims have legal defenses available that may delay, modify or prevent the dissolution. Understanding these defenses allows partners to assert their rights effectively while exploring resolution alternatives.
The Right to Dissolution is Broad but Not Absolute
While any partner can demand dissolution, this right is subject to limitations. Courts have discretion about how to implement dissolution, and certain defenses can affect the timing, method, or terms of dissolution even when the underlying right exists.
The Agreement Defense
If partners have a valid agreement limiting the right to demand dissolution for a specific period, the court will give effect to this agreement for its valid duration. A dissolution demand made in violation of such an agreement can be stayed until the agreement period expires or its validity is addressed.
The Timing Defense
Demanding dissolution at a particularly harmful time – immediately before a significant improvement in the property’s value, at the depth of a market downturn, or when the property is about to generate significant income – may be addressed by the court in determining the timing and manner of dissolution.
The Bad Faith Defense
When a dissolution demand is made in bad faith – purely to harm the other partner rather than for any legitimate reason – the court may take this into account. Courts do not reward abusive use of legal rights.
The Legitimate Expectation Defense
If one partner invested significantly in the property based on an understanding that the partnership would continue for a certain period, and dissolution is now demanded in violation of that understanding, the court may award compensation even while ordering dissolution.
Alternative Remedies as a Defense Strategy
Rather than simply resisting dissolution, a defending partner can propose alternatives – buyout at fair value, improved management arrangements, or other solutions – that address the claimant’s legitimate concerns without forcing a sale.
