Bryan Haynes comments in the Globe and Mail on applying material adverse change (MAC) clauses in acquisition agreements during the pandemic. The Court of Queen’s Bench of Alberta is set to consider this rarely invoked term of contract law in a case over whether the COVID-19 pandemic and economic downturn amount to a material change that can be used to back out of a recent deal to acquire a company.

Bryan says, “The jurisprudence in Canada is quite sparse on this . . . It will be very interesting, first of all, to have a Canadian case on point, and secondly, a Canadian case that’s dealing with the current pandemic.” Bryan said that from what case law there is, buyers typically face an “uphill battle” in successfully invoking such clauses to terminate deals. “I think the court’s got a hot potato to deal with here.”

Bryan also says that the duration of the material change will be a factor in the Alberta case. “With the pandemic, we’ve seen the lockdown of the economy and a very sharp, dramatic downturn, but there’s a big question mark as to how long this will last. Probably over the course of the summer or early fall, the economy will be opened up . . . that will be an obstacle the buyer will have to overcome.”