Question 1

What is a key person clause in a Florida business agreement?

Accepted Answer

A key person clause is a contractual provision that gives one party certain rights (typically the right to terminate or renegotiate) if a specified key individual leaves the business or is no longer involved. Key person clauses are common in: investment agreements (investors can withdraw if the fund manager or portfolio manager departs), joint venture agreements (the venture may be dissolved if the managing partner leaves), management agreements (the property owner can terminate if the designated manager departs), construction contracts (the owner can terminate if the lead architect or project manager is replaced), and professional service agreements (the client can terminate if the designated attorney, accountant, or consultant is reassigned).

Question 2

How does a key person clause work in Florida real estate transactions?

Accepted Answer

In real estate: a development joint venture agreement may include a key person clause that allows the passive investor to withdraw (and recover their investment) if the active developer departs or is incapacitated. A property management agreement may give the property owner the right to terminate if the designated property manager is no longer assigned to the property. A construction contract may allow the owner to terminate if the general contractor’s named project superintendent is removed. The clause typically: identifies the key person by name or title, specifies the triggering events (death, disability, termination of employment, reassignment), defines the rights triggered (termination, renegotiation, withdrawal, accelerated repayment), and establishes any cure periods (the business has a specified time to designate an acceptable replacement).

Question 3

Can a key person clause be enforced in Florida?

Accepted Answer

Yes. Key person clauses are enforceable contracts in Florida, subject to standard contract principles. Enforceability factors: the clause must clearly identify the key person and the triggering events, the rights triggered must be reasonable and clearly defined, the clause must be supported by consideration (part of the overall agreement), and both parties must have agreed to the clause voluntarily. Florida courts enforce key person clauses because they reflect the legitimate business interest of the contracting party who specifically relied on the key person’s involvement. The clause should also address: what constitutes an "acceptable replacement," who determines whether a replacement is acceptable, and the timeline for designating a replacement.

Key Person Clause

Key Person Clauses in Florida Business Agreements

Common Uses

How It Works

Enforceability

Related Terms

Barnes Walker Business Law

Ready to Get Started?