Material adverse change

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The basic principles of contract
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: Restitutionquasi-contractquasi-agency

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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”.[1]

Our American friends

But as the doyen of drafting attests,[2] 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

References

  1. Attrill & Ors v Dresdner Kleinwort Ltd [2012] EWHC 1189 cited in Decura v UBS [2015] EWHC 171 see transcript
  2. Ken Adams, Rethinking “Material” and “Material Adverse Change”