A Partner Promised an Employee an Ownership Stake. Was It Enforceable?

For a contract to be valid and binding, the parties must manifest an intent to be bound and the terms must be sufficiently definite for a court to fashion a remedy. When a court cannot determine whether a contract has been performed, it must conclude that no contract existed in the first place. These basic principles of contract formation take on added significance when a single partner attempts to bind a partnership — and its other partners — to promises that affect everyone’s ownership interest.

The Pennsylvania Superior Court recently addressed this issue in Lascoli v. Thomas A. Fahr Masonry Contractors, 2026 PA Super 59, decided on March 25, 2026.

The Facts

In 2007, an employee signed a one-page employment contract with a masonry partnership. Beyond standard compensation terms, the contract contained two provisions at issue: one promising the employee a 10% ownership interest after ten years of service, with an additional 1% per year thereafter; and another granting him the managing partner’s one-third stake upon the partner’s death, “with terms to be discussed.” The employee worked for the partnership for fourteen years but never received any ownership interest. He sued in 2021. After a bench trial, the court entered judgment against him.

The Court’s Reasoning

The intermediate appellate court affirmed on multiple grounds.

First, it concluded that the 10% provision was too indefinite to enforce. The contract failed to describe the employee’s duties and did not specify whether full-time employment was required — a significant omission given that the employee had worked only part time for several years. The parties’ own course of conduct did not clarify the provision’s operation. If anything, it confirmed the uncertainty: the employee did not demand his ownership interest upon his ten-year anniversary, and the matter remained the subject of unresolved discussions for years.

Second, the provision granting the employee the managing partner’s ownership interest upon the partner’s death was unenforceable on its face. The phrase “with terms to be discussed” made it merely evidence of ongoing negotiations, not a binding agreement. Under Pennsylvania law, a document referencing future terms is not a contract upon which a court may award a remedy for breach.

Third, the court addressed apparent authority under the Pennsylvania Uniform Partnership Act, § 8431. While hiring employees falls within the ordinary course of a partnership’s business, promising an ownership interest does not. A single partner lacks apparent authority to bind the partnership to an agreement that affects every other partner’s ownership stake without their consent. The court cited analogous precedent involving the unauthorized sale of partnership real estate and the execution of confession of judgment instruments — acts that courts have consistently held to fall outside the scope of a single partner’s authority.

Practitioner Takeaways

This case is a cautionary tale for anyone drafting or relying on employment agreements that promise equity or ownership interests in a business.

The enforceability of such promises depends on two things: the definiteness of the contract’s terms and the authority of the person making the promise. A vague provision in a one-page document — no matter how well-intentioned — may fail on both counts. Courts will not impose reasonable terms where the parties included a term but expressed it ambiguously. And a single partner’s signature, even as “managing partner,” does not bind the partnership to obligations that exceed the ordinary course of business.

Would a court in Puerto Rico reach the same result? Likely yes, on both fronts. Puerto Rico’s Civil Code requires that the object of a contract be certain and determined — or at least determinable. A promise of an ownership interest that fails to define the employee’s duties or the conditions of vesting presents the same definiteness problem. And the phrase “with terms to be discussed” would be equally fatal: there is no contract where the parties have not consented to essential terms. As for the partner’s authority, Puerto Rico’s Civil Code requires the consent of all partners for acts that exceed ordinary administration of the partnership. Transferring an ownership interest clearly exceeds that threshold.

Businesses contemplating equity-based compensation arrangements — whether structured as partnership interests, LLC membership interests, or stock options — should ensure that the agreement is drafted with precision and executed with proper authority. A well-drafted contract is the foundation of any enforceable promise.

Read the full opinion (PDF)

This post is for informational purposes only and does not constitute legal advice. For questions about contract formation, partnership agreements, or business disputes, contact Riefkohl Law.