Volume 1 Issue 1 (November, 2020)

Volume 1 Issue 1 (November, 2020)

Material Adverse Effect Clauses in the Backdrop of Covid-19 Pandemic – An Analysis

By Rishi Kannan,
Student ,

Sathyabama Institute of Science and Technology, Chennai


The COVID-19 Pandemic has hard-hit the feasibility of performance of the terms and conditions of many signed commercial contracts, purchasing agreements by making the globe go on a pause mode. The most unprecedented healthcare crisis of the century is shattering the global Merger and Acquisition deals. Many purchasing/lending parties involved in acquisition agreements and financing agreements have started invoking the Material Adverse Effect (MAE) clauses as the financial conditions of the selling/borrowing parties got adversely affected by the COVID-19 stricken world. For any event to be constituted as a “Materially Adverse” event or to tap on the Material Adverse Effect (MAE) clause (if any) in the concerned acquisition or purchasing agreement, the change or condition caused by the event in question should materially and adversely affect the assets, liabilities, and financial results of operations, financial conditions and the future financial prospects of the target company in question. On the other hand, COVID-19 Pandemic is an “unanticipated” event, the qualification of which as a Material Adverse Change is dependent upon the design of the Material Adverse Effect (MAE) clauses of each agreement. The current and the future of the Material Adverse Effect (MAE) in respect of the COVID-19 Pandemic is the theme which this paper attempts to address. COVID-19 and its impact on the materiality of target companies, the materiality threshold, the future design of MAE clauses in the International forum are some of the focus areas of this paper and concludes that for constituting COVID-19 as a MAE is dependent upon the specific wordings and conditions precedent of each agreement.

*Publication (Month and Year) – November, 2020

Recommended Citations :


Rishi Kannan, ‘Material Adverse Effect/Material Adverse Change Clauses in the Backdrop of COVID-19 Pandemic – Analysis’, [2020] 1 IJBLS https://intbusinesslaw.com/material-adverse-effect-clauses-in-the-backdrop-of-covid-19-pandemic-an-analysis/

Bluebook 19th Ed.

Rishi Kannan, Material Adverse Effect/Material Adverse Change Clauses in the Backdrop of COVID-19 Pandemic – Analysis, 1 IJBLS 14, 14 – 26 (2020).