Bryan Haynes comments in the Globe and Mail on an Ontario court decision that ruled against a company trying to get out of a purchase agreement by saying the pandemic created a material adverse effect (MAE) and the deal should not close.
“My general view is it is an uphill battle for buyers to wiggle out of their agreements to close deals on the basis of the pandemic,” said Bryan Haynes, a corporate and commercial law partner at Bennett Jones LLP. “This case is proving that.”
He said to win on an MAE clause, a buyer would have to show that the pandemic disproportionately affected a seller’s particular business, beyond what was typical in the seller’s industry as a whole.
“The pandemic is not a pretext for buyers to walk away from their obligations under purchase agreements. It’s normal for buyers to have second thoughts or buyers’ remorse, but the lesson here is this pandemic is not going to give them the out they may have hoped for,” Mr. Haynes said. “The takeaway for vendors is you have more leverage than you may have thought before.”
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