Which type of contract allows remaining partners to buy out a disabled partner's interest?

A Disability Buy-Sell Agreement is specifically designed to address the situation in which a business partner becomes disabled and is unable to fulfill their role in the partnership. This type of contract establishes a clear framework for the remaining partners to buy out the disabled partner's interest in the business. It often outlines the terms concerning how the buyout will be financed, usually through life or disability insurance policies, ensuring that the remaining partners have the financial means to acquire the disabled partner's share.

This type of agreement provides security for both the partners and the disabled partner’s family, ensuring that a smooth transition occurs without detrimental impact to the business operations. The arrangement also helps to prevent conflicts over the valuation of a partner's interest and ensures that the disabled partner’s rights and obligations are effectively managed.

In contrast, options like a Cross Purchase Agreement or a Life Insurance Agreement typically involve arrangements for when a partner passes away rather than becoming disabled. A Termination Agreement might dissolve the partnership altogether, which does not address the specific need for handling a disabled partner's interests within the business context. Here, the focus is specifically on the buyout process related to a partner's disability, making the Disability Buy-Sell Agreement the most appropriate choice.