Material adverse change

The basic principles of contract →Go uptown Formation: capacity and authority · representation · misrepresentation · offer · acceptance · consideration · intention to create legal relations · agreement to agree · privity of contract oral vs written contract · principal · agent Interpretation and change: governing law · mistake · implied term · amendment · assignment · novation Performance: force majeure · promise · waiver · warranty · covenant · sovereign immunity · illegality · severability · good faith · commercially reasonable manner · commercial imperative · indemnity · guarantee Breach: breach · repudiation · causation · remoteness of damage · direct loss · consequential loss · foreseeability · damages · contractual negligence · process agent Remedies: damages · adequacy of damages ·equitable remedies · injunction · specific performance · limited recourse · rescission · estoppel · concurrent liability Not contracts: Restitution — quasi-contract — quasi-agency Index: Click ᐅ to expand: Contract Tort Restitution Tell me more Sign up for our newsletter — or just get in touch: for ½ a weekly 🍺 you get to consult JC. Ask about it here.

The material adverse change — fondly known as a “MAC” is something ineffable and hard to describe in concept, but you will know one when you see it. It is a hotly debated topic among the negotiator community and a good example of the limitations of all this breathless smart contract chat.

English law

But what, exactly, is “material”? English lawyers might shrug and be a little hand-wavy here — you know, not trivial; not formalistic:

“‘Material’ has its normal meaning of something which is real, substantial, significant, not de minimis, something which would affect the way in which you look at something but not necessarily decisively”.

Our American friends

But as the doyen of drafting attests, our litigationey American friends have gone further down the rabbit-hole than that. Of course they have. There is US authority that “material” means “information that, if known, would cause a party to walk away from the transaction”. This is a high bar: a lot higher than “non-trivial”.

See also

• Events of default
• Termination events
• Creditworthiness
• Smart contracts