Richards Layton & Finger
 

Eliminating Fiduciary Duties and the Status of the Implied Contractual Covenant of Good Faith and Fair Dealing

February 22, 2012

Section 17-1101(d) of the Delaware Revised Uniform Limited Partnership Act provides that a partnership agreement may expand, restrict or eliminate the fiduciary duties owed by a partner or other person to the limited partnership, a partner or any other person that is a party to or is otherwise bound by such partnership agreement, provided that the implied contractual covenant of good faith and fair dealing may not be eliminated.

In Gerber v. Enterprise Products Holdings LLC, the Delaware Court of Chancery upheld the elimination of fiduciary duties contained in the partnership agreement of a publicly traded Delaware limited partnership and added to a growing list of cases in which courts have failed to find a breach of the implied covenant. However, Gerber also illustrates the need for care and diligence when drafting partnership agreements.