Material adverse change and material adverse effect provisions: Construction and application
Material adverse change and material adverse effect provisions: Construction and application
Rafal Zakrzewski
This article examines the rules and principles of English law surrounding the construction and operation of material adverse change and material adverse effect provisions, with a particular focus on financing transactions. Such clauses raise a number of interesting issues of contract law and contractual interpretation; one of the key issues being the meaning and scope of "material". It is argued that materiality ought to be interpreted in the context of the particular agreement and the transaction as a whole, without ignoring the remedial consequences that are to be triggered by the relevant provision. Numerous other issues that arise for consideration in relation to material adverse change and material adverse effect clauses are also critically examined.
Law and Financial Markets Review, Vol. 5, No. 5, Oct 2011: 344-356