You Get What You Bargin For: Tariffs And MAE Clauses

Trump-era proposed tariffs on Canadian goods have introduced uncertainty and volatility into Canada's M&A market. However, uncertainty in the market is nothing new to Canadian M&A participants of the last 5 years, who have navigated regulatory changes, the COVID-19 pandemic, as well as other geopolitical factors affecting M&A on a macroeconomic level. During times of uncertainty, one of the key legal mechanisms that comes into focus in M&A agreements is Material Adverse Effect ("MAE") clauses. MAE clauses are designed to allocate risk between the parties, allowing a purchaser to walk away from a deal if a significant event occurs that materially impacts the target company's value. Courts will interpret MAE clauses based on the specific language of the contract and the surrounding facts when evaluating whether an event meets the materiality threshold. In 2020 the Ontario Superior Court of Justice considered the elements of an MAE in the context of the COVID-19