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Contract terms that deal with material adverse changes are carefully negotiated by the parties and take into account the relevant circumstances of each party. Thus, the definition of material adverse changes is unique to each contract.
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Large transactions often require a long period of time between the signing of a contract and completion of the transaction. For example, time may be required to obtain approval of the transaction by government agencies,
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When a party to a contract claims that a material adverse change had occurred and refuses to complete the transaction on that ground, the other party may disagree and
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of that court, the party that seeks to avoid completion of a transaction must prove that a material adverse change as defined by the parties' contract has occurred.
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that allows the acquirer, investor, or lender to cancel the transaction if a material adverse change occurs. Where an acquiring company uses its own
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to the transaction can cancel it if a material adverse change significantly reduces the value of the other party.
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because many large
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Delaware Court of
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may ensue. One notable example of this was the planned acquisition of
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as part of the consideration paid to acquire another company, or in a
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to acquire, invest in, or lend money to a company often contains a
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Accredited Home
Lenders v. Lone Star Funds: A MAC Case Study
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of two companies, the contract may provide that either
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S. Davidoff, Professor of Law, Wayne State Law School
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S. Davidoff, Professor of Law, Wayne State Law School
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246:2011 Annual MAC Survey from Nixon Peabody
236:2012 Annual MAC Survey from Nixon Peabody
231:2013 Annual MAC Survey from Nixon Peabody
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221:2015 Annual MAC Survey from Nixon Peabody
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