You May Think You Are a Partner, But… Chancery Opinion Reaffirms That Any Agreement, Written or Oral, Must Include All Material Terms

In a recent decision by Vice Chancellor Glasscock of the Delaware Court of Chancery, Handler v. Centerview Partners Holdings, L.P., the Vice Chancellor considered whether a partnership agreement existed based on a purported oral agreement. The Court of Chancery’s decision provides useful guidance to practitioners and reaffirms that, while Delaware law permits oral agreements, including partnership agreements, that agreement must include all material, essential terms – an agreement to agree is insufficient.


The action in Centerview stemmed from a books-and-records demand Plaintiff made pursuant to 6 Del. C. § 17-305 (the partnership equivalent of the more common Section 220 provision applicable to corporations). Centerview refused the demand, asserting that Plaintiff was not entitled to books and records because he was not a partner of the relevant limited partnership. Instead, they argued that Plaintiff was just an employee of an affiliated entity.

The Court of Chancery concluded that, although Plaintiff held the title of “Partner” within the company, this title was merely semantics. As Vice Chancellor Glasscock described it, the title of “Partner” “was an honorific: such partners were no more equity holders than Colonel Harland Sanders was a field officer.” Plaintiff’s employment letter “did not reflect an actual partnership agreement at Centerview, but reflected an at-will employee status.” This employment letter gave Plaintiff (and another employee) a percentage interest in the terminal value of the company upon a liquidity event, but  “explicitly stated that [the terminal value interest] did not entitle Plaintiff to share profits of the firm, ownership, or governance rights.”

The Court of Chancery delved deeply into the parties’ interactions to determine whether a partnership agreement had been reached. A few years after joining the company, Plaintiff and another similarly situated individual attempted to renegotiate their original employment letter agreement into a partnership agreement. However, when initially presented with a draft limited partnership agreement, Plaintiff rejected it without providing any counterproposal. The parties then exchanged various proposals and agreed to meet. Plaintiff claimed that an oral agreement was reached at this meeting, but the parties continued to discuss various terms in the months and years following, and a written agreement was never executed. Meanwhile, Plaintiff’s compensation continued to be subject to year-end negotiations.

The Court’s Conclusion

Under traditional principles of Delaware partnership and contract law, the Court of Chancery  held that Plaintiff did not meet his burden of proving that the parties had orally agreed to a partnership. Delaware partnership law holds that a limited partnership agreement is any agreement “written, oral or implied” of the partners. Delaware contract principles apply to partnership agreements, such that “a partnership agreement is only enforceable if its contains all material terms.”

In analyzing both the circumstances at the parties’ meeting at which Plaintiff claimed an agreement was reached, as well as the parties’ course of conduct in the years following, Vice Chancellor Glasscock found that no partnership existed because the parties had never agreed on all the essential terms in the term sheet. Plaintiff himself conceded that “what took place at the [meeting was] an ‘agree[ment] to agree’ regarding the partnership” and Plaintiff’s conduct following this meeting additionally demonstrated that he did not believe an oral partnership agreement existed. Vice Chancellor Glasscock emphasized that “several material terms” were still being negotiated following the meeting, and that “the parties also did not perform in accordance with the terms identified in the purported oral partnership agreement.” Thus, notwithstanding some evidence supporting Plaintiff’s contentions, he failed to meet his burden of proving that an oral partnership agreement was reached.

Key Takeaways

The decision in Handler v. Centerview reaffirms two key aspects of how Delaware courts interpret and apply Delaware partnership law. Foremost, this decision reemphasizes a key point from an earlier Court of Chancery decision, Grunstein v. Silva – in Delaware partnership law, whether an agreement be oral or written, an agreement is not enforceable unless all the essential terms have been agreed upon. Further, Centerview suggests that the title “Partner” in and of itself does not confer partnership rights onto an employee unless that employee shares in both the risk and reward of the enterprise.

This post is as of the posting date stated above. Sidley Austin LLP assumes no duty to update this post or post about any subsequent developments having a bearing on this post.