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Policing Limited Liability Companies Under Contract Law, Larry Dimatteo

Larry A DiMatteo

In 2004, Delaware amended its limited liability company law (Delaware Act) to allow for the contractual elimination of fiduciary duties. The statute seeks to emphasize the contract basis of limited liability companies (LLCs). It does this by providing the legal support for the incorporation of clauses that eliminate the traditional duties of care and loyalty (elimination clauses) found in corporate, agency, and trust law. The only immutable principle enunciated by the Delaware Act is the covenant of good faith. The primary focus of this paper will be on the ability of contract law to police the management and operation of …