Consider a US based LLC with a buyout clause for a partner where the company is allowed to kick the partner out but if they do then they will have to pay him/her 30% of current year's profits. In this case, if the partner gets kicked out in 2017, he gets 30% of the profits for the year 2017. This is fine.

Now let's consider a similar buyout clause but which allows the partner an option to take the 30% of profits of a year 10 years from now. So that if the partner gets kicked out today in 2017, he/she is allowed to wait until 2027 when he receives 30% of the profits made in the year 2027.

Is this actually something that is legally allowed (that is, if the company doesn't pay the partner in 2027, will courts consider this buyout clause valid)? What happens if the company is restructured by then in ways so that this is no longer considered fair?

1 Answer 1


This appears to be a perfectly valid basis for a contract as there is consideration on both sides: the partner gives up their claim on the company in return for payment in 10 years.

If the company fails to fulfill its obligation in 10 years then the partner can sue for the money or for the return of their shares (and their share of 10 year's profits).

Fairness is not an issue: unless there is a specific law (e.g. for consumer contracts), contracts do not have to fair, they just have to be conscionable. In any event, fairness/conscionabilty is assessed at the time of the formation of the contract, not at the time of delivery.

The contract is not without risks: the company may not exist in 10 years, the company may find it difficult to pay (profit is not cash), profits in a single year may be abnormally high or low, the owners are in a position to legally manipulate the year 10 profits etc.


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