Court Of Chancery Addresses Material Adverse Change Clause In Commercial Contract
A material adverse change or effect clause permits a party to avoid its contractual obligations under certain circumstances. Delaware courts have addressed so-called “MAC” clauses in the merger agreement context on a number of occasions. Under that precedent, the party claiming a MAC has a high burden of proof and the alleged adverse change to a company’s business must be unexpected, serious, and extend over a significant period of time. A short-term hiccup is not a MAC. This decision is notable because it largely extends this law to the commercial contract context.