A recent Delaware Court of Chancery decision identified more than 21 reasons why an LLC is not purely a creature of contract. Hassanein v. NTO Fund I, LLC, C.A. No. 2025-0299-DH (JTL) (Del. Ch. August 4, 2026), is noteworthy for several reasons.
It should be included in the pantheon of iconic and consequential Delaware Chancery opinions because it provides an illustrative, but not exclusive, list of reasons, with copious citations to authority, why an LLC Agreement might be primarily a creature of contract—but is not purely, or only, a contractual creature. Slip op. at 9-17.
The court also observes that equitable remedies are also among the potentially available factors to consider. See footnote 50. A recent decision, by the same Vice Chancellor, that we highlighted on these pages, also addressed the issue. There is much else to commend this decision, but I only adumbrate it on these pages for purposes of whetting the appetite of serious followers of the law.
Other Highlights
- The court provided a thorough examination of the difference between the status of an investment as a loan or equity in both the LLC and corporate contexts, as well as the consequences of that classification. Slip op. at 20-30.
- The court recites basic contract interpretation principles that are always useful. Slip op. at 18-19.
- The court engages in a thorough examination of the difference between a direct claim as compared to a derivative claim in both the LLC and corporate context. Slip op. at 43-55.
- The court explains the rights of a creditor pursuant to § 18-502(b) of the LLC Act. Slip op. at 54-63.
- See generally footnote 24 which notes that the General Assembly a few years ago abrogated the concept of incurable contract voidness.