diff --git a/org.eclipse.jgit.test/tst/org/eclipse/jgit/merge/ResolveMergerTest.java b/org.eclipse.jgit.test/tst/org/eclipse/jgit/merge/ResolveMergerTest.java
new file mode 100644
index 000000000..4cb089602
--- /dev/null
+++ b/org.eclipse.jgit.test/tst/org/eclipse/jgit/merge/ResolveMergerTest.java
@@ -0,0 +1,98 @@
+/*
+ * Copyright (C) 2012, Robin Stocker <robin@nibor.org>
+ * and other copyright owners as documented in the project's IP log.
+ *
+ * This program and the accompanying materials are made available
+ * under the terms of the Eclipse Distribution License v1.0 which
+ * accompanies this distribution, is reproduced below, and is
+ * available at http://www.eclipse.org/org/documents/edl-v10.php
+ *
+ * All rights reserved.
+ *
+ * Redistribution and use in source and binary forms, with or
+ * without modification, are permitted provided that the following
+ * conditions are met:
+ *
+ * - Redistributions of source code must retain the above copyright
+ *   notice, this list of conditions and the following disclaimer.
+ *
+ * - Redistributions in binary form must reproduce the above
+ *   copyright notice, this list of conditions and the following
+ *   disclaimer in the documentation and/or other materials provided
+ *   with the distribution.
+ *
+ * - Neither the name of the Eclipse Foundation, Inc. nor the
+ *   names of its contributors may be used to endorse or promote
+ *   products derived from this software without specific prior
+ *   written permission.
+ *
+ * THIS SOFTWARE IS PROVIDED BY THE COPYRIGHT HOLDERS AND
+ * CONTRIBUTORS "AS IS" AND ANY EXPRESS OR IMPLIED WARRANTIES,
+ * INCLUDING, BUT NOT LIMITED TO, THE IMPLIED WARRANTIES
+ * OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE
+ * ARE DISCLAIMED. IN NO EVENT SHALL THE COPYRIGHT OWNER OR
+ * CONTRIBUTORS BE LIABLE FOR ANY DIRECT, INDIRECT, INCIDENTAL,
+ * SPECIAL, EXEMPLARY, OR CONSEQUENTIAL DAMAGES (INCLUDING, BUT
+ * NOT LIMITED TO, PROCUREMENT OF SUBSTITUTE GOODS OR SERVICES;
+ * LOSS OF USE, DATA, OR PROFITS; OR BUSINESS INTERRUPTION) HOWEVER
+ * CAUSED AND ON ANY THEORY OF LIABILITY, WHETHER IN CONTRACT,
+ * STRICT LIABILITY, OR TORT (INCLUDING NEGLIGENCE OR OTHERWISE)
+ * ARISING IN ANY WAY OUT OF THE USE OF THIS SOFTWARE, EVEN IF
+ * ADVISED OF THE POSSIBILITY OF SUCH DAMAGE.
+ */
+package org.eclipse.jgit.merge;
+
+import static org.junit.Assert.assertFalse;
+
+import java.io.File;
+
+import org.eclipse.jgit.api.Git;
+import org.eclipse.jgit.lib.RepositoryTestCase;
+import org.eclipse.jgit.revwalk.RevCommit;
+import org.eclipse.jgit.treewalk.FileTreeIterator;
+import org.eclipse.jgit.util.FileUtils;
+import org.junit.Test;
+
+public class ResolveMergerTest extends RepositoryTestCase {
+
+	@Test
+	public void failingPathsShouldNotResultInOKReturnValue() throws Exception {
+		File folder1 = new File(db.getWorkTree(), "folder1");
+		FileUtils.mkdir(folder1);
+		File file = new File(folder1, "file1.txt");
+		write(file, "folder1--file1.txt");
+		file = new File(folder1, "file2.txt");
+		write(file, "folder1--file2.txt");
+
+		Git git = new Git(db);
+		git.add().addFilepattern(folder1.getName()).call();
+		RevCommit base = git.commit().setMessage("adding folder").call();
+
+		recursiveDelete(folder1);
+		git.rm().addFilepattern("folder1/file1.txt")
+				.addFilepattern("folder1/file2.txt").call();
+		RevCommit other = git.commit()
+				.setMessage("removing folders on 'other'").call();
+
+		git.checkout().setName(base.name()).call();
+
+		file = new File(db.getWorkTree(), "unrelated.txt");
+		write(file, "unrelated");
+
+		git.add().addFilepattern("unrelated").call();
+		RevCommit head = git.commit().setMessage("Adding another file").call();
+
+		// Untracked file to cause failing path for delete() of folder1
+		file = new File(folder1, "file3.txt");
+		write(file, "folder1--file3.txt");
+
+		ResolveMerger merger = new ResolveMerger(db, false);
+		merger.setCommitNames(new String[] { "BASE", "HEAD", "other" });
+		merger.setWorkingTreeIterator(new FileTreeIterator(db));
+		boolean ok = merger.merge(head.getId(), other.getId());
+
+		assertFalse(merger.getFailingPaths().isEmpty());
+		assertFalse(ok);
+	}
+
+}
diff --git a/org.eclipse.jgit/src/org/eclipse/jgit/merge/ResolveMerger.java b/org.eclipse.jgit/src/org/eclipse/jgit/merge/ResolveMerger.java
index 7b1b36c94..6130cc72c 100644
--- a/org.eclipse.jgit/src/org/eclipse/jgit/merge/ResolveMerger.java
+++ b/org.eclipse.jgit/src/org/eclipse/jgit/merge/ResolveMerger.java
@@ -221,7 +221,7 @@ public class ResolveMerger extends ThreeWayMerger {
 				builder = null;
 			}
 
-			if (getUnmergedPaths().isEmpty()) {
+			if (getUnmergedPaths().isEmpty() && !failed()) {
 				resultTree = dircache.writeTree(getObjectInserter());
 				return true;
 			} else {