Does Covid-19 Have A Material Adverse Effect?

Many contracts, M&A agreements in particular, contain a clause allowing the buyer to terminate (or trigger more favourable terms) before the acquisition is finalised, if there has been a material adverse change either in the nature of the asset being purchased or its value.

These are known as MAC and MAE clauses. MAC and MAE clauses are in focus at the moment because few events over the past 100 years have had a more material adverse change or effect on businesses than the Covid-19 pandemic. The question parties are asking is whether buyers can pull out of a sale because of it?

This issue was considered by the Commercial Court in London last year who concluded, as is often the case, that "it depends". In particular the court will look closely at the precise wording used in the clause. In the case at hand, Travelport Ltd & Ors v WEX Inc [2020] EWHC 2670 (Comm), the relevant clause specifically anticipated pandemics. The clause said that "Since the date of this