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Failure Of A "Basic Assumption": The Emerging Standard For Excuse Under Mae Provisions, Nathan Somogie

Michigan Law Review

The onset of the current economic crisis has led many strategic and financial acquirers to reconsider the desirability of transactions to which they had previously agreed. Because many of these agreements contain substantial termination fees, buyers have increasingly sought to be excused from their contractual obligations by invoking Material Adverse Effect ("MAE") provisions. Reliance on MAE clauses as a basis for termination has historically been risky due to a lack of clarity in the case law regarding the standard for excuse under such provisions. A recent decision by the Delaware Chancery Court, Hexion v. Huntsman, the third in a …