Why Officer Liability for Breach of Contract & Fraud Is So Rare In New York
As a corollary to our blog article "When You Can Incur Personal Liability for a Debt in New York," the question arises as to what New York's courts will do when a claimant tries to hold a corporate officer personally liable in either breach of contract or fraud. To that end, in a November 18 decision in Liang v. Sollecito, a Civil Court in New York County held that "The officers of a corporation may be held personally liable for torts committed on behalf of the corporation, but cannot be held personally liable on contracts provided that they did not bind themselves individually." Thus, where there are no allegations that the officer had any direct involvement in the contract, or that he personally made any fraudulent misrepresentations with regard to the contract, then the complaint should be dismissed - even before formal discovery begins. Which is precisely what happened in Liang. And this should come as no surprise; After all, how often do you think corporate officers stick out their necks to render themselves personally liable? Even more challenging, of those times that it may have actually occurred, how easy do you think it will be to prove it?
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