assignment provision merger

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Few things are more fundamental to M&A due diligence than determining whether any of the material contracts to which the target is a party require a counterparty’s consent as a condition to the proposed acquisition. And that determination is significantly influenced by the specific language set forth in the contract’s anti-assignment/change of control provision, as well as the form the proposed acquisition takes—i.e., whether the transaction is an asset purchase the target, a purchase of equity the target, or a merger the target (and if a merger, whether that merger is direct or triangular, and forward or reverse). A recent Delaware Superior Court decision, , 2020 WL 5554161 (Del. Super. Sept. 16, 2020), is a stark reminder of the importance of carefully analyzing change of control/anti-assignment provisions and taking advantage of all available structuring alternatives to avoid untoward results that can occur from completing an acquisition deemed to require a counterparty’s consent. involved a claim by a successor to a selling party under an acquisition agreement for payment by the buyer of a Conditional Payment owing to the selling party if the mining property sold pursuant to that agreement remained in operation after a date certain. It appears that the requirements for triggering the obligation to make the Conditional Payment were satisfied, but because of some transactions undertaken by the selling party, and the impact of an anti-assignment clause in the acquisition agreement, the buyer claimed that the person actually asserting entitlement to that Conditional Payment was not so entitled (indeed, no one was because the selling party had ceased to exist). Following the acquisition of the mining property by the buyer, the stockholders of the selling party sold all of their shares in the selling party to a third party, but purported to carve out the Conditional Payment Obligation owing to the selling party from the sale of stock of the selling entity. So, when the Conditional Payment came due, the selling party’s former stockholders, rather than the selling party, sued to collect the Conditional Payment when it was not forthcoming from the buyer. In an earlier decision, 2019 WL 3976078 (Del. Super. Aug. 22, 2019), the court held that the selling party’s former stockholders had no standing to claim the Conditional Payment because the only person entitled to that Conditional Payment was the selling party itself, and there really is no such thing as carving out assets of an entity in favor the entity’s stockholders selling the stock of that entity, without the entity itself assigning (by way of a dividend) those assets to its stockholders. And, of course, if an assignment had occurred it was prohibited by the anti-assignment provision in the agreement creating the Conditional Payment Obligation. Thus, the court dismissed the former stockholders’ claim outright. was the second bite at the apple. If the selling entity’s former stockholders, who purported to retain the right to the Conditional Payment, had no standing to pursue collection of the Conditional Payment themselves, then presumably the selling party still could (and one would assume the selling party would then have an obligation to turn over the Conditional Payment to the former stockholders when collected). But alas, it turns out that, following the acquisition of the stock of the selling party by the third party, the third party undertook a number of transactions under Canadian law to amalgamate the selling party into an entirely new entity as the surviving entity of that amalgamation; the selling entity had ceased to exist as a matter of Canadian law. Thus, the plaintiff in this second bite lawsuit to collect what was presumably otherwise owed was not the selling party to the original acquisition agreement, but a successor to that selling party. While the amalgamation was a creature of Canadian law, the original acquisition agreement containing the anti-assignment clause was governed by Delaware law. The parties apparently conceded that the amalgamation was the equivalent of a merger under Delaware law. The buyer argued that the anti-assignment clause in the original acquisition agreement was violated when the amalgamation occurred without the buyer’s consent; and that the successor had no standing to claim the Conditional Payment. However, under Delaware law, a general prohibition on a party transferring or assigning an agreement does not automatically prohibit a merger involving a contracting party, even one in which the contracting party is not the survivor of such merger. As noted by the Delaware Court of Chancery in , 1993 WL 294847, at 8 (Del. Ch. Aug. 2, 1993): Nonetheless, “[w]hen an anti-assignment clause includes language referencing an assignment ‘by operation of law,’ Delaware courts generally agree that the clause applies to mergers in which the contracting company the surviving entity.” Here the anti-assignment clause in the original acquisition agreement did purport to include a prohibition on assignments “by operation of law.” And, although Delaware has recognized that a merger in which the contracting party the survivor (a reverse triangular merger) is not an assignment by operation of law “because the contract rights remain with the contracting party and do not pass to another entity,” the amalgamation here resulted in a new entity acquiring the contract rights of the original selling party and the original selling party ceasing to exist. Thus, the effect of the anti-assignment clause and its applicability to the amalgamation resulted in the buyer having no obligation for the payment of the Conditional Payment to anyone. Although the court appears to acknowledge the seeming “unfairness of allowing [the buyer] to avoid making a payment it allegedly owes[,]” the court nonetheless concludes that “it is not this Court’s function to save sophisticated contracting parties from an unfair or unanticipated result of their own corporate transactions.” After all, “[t]he parties could have avoided this result through careful drafting during contract negotiations or by utilizing a different corporate structure when [the selling party and the surviving new entity] combined.” (↵ returns to text) Glenn West Weil , Weil’s Global Private Equity Watch, April 27, 2020, . , 2019 WL 3976078, at 2. We have previously addressed how these kind of anti-assignment “workarounds” can sometimes work (or not). Glenn West & Maryam Naghavi, , Weil , Weil’s Global Private Equity Watch, May 2, 2018, . 2020 WL 5554161, at 3. 2020 WL 5554161, at 5.

Few things are more fundamental to M&A due diligence than determining whether any of the material contracts to which the target is a party require a counterparty’s consent as a condition to the proposed acquisition. And that determination is significantly influenced by the specific language set forth in the contract’s anti-assignment/change of control provision, as well as the form the proposed acquisition takes—i.e., whether the transaction is an asset purchase the target, a purchase of equity the target, or a merger the target (and if a merger, whether that merger is direct or triangular, and forward or reverse). A recent Delaware Superior Court decision, , 2020 WL 5554161 (Del. Super. Sept. 16, 2020), is a stark reminder of the importance of carefully analyzing change of control/anti-assignment provisions and taking advantage of all available structuring alternatives to avoid untoward results that can occur from completing an acquisition deemed to require a counterparty’s consent.

involved a claim by a successor to a selling party under an acquisition agreement for payment by the buyer of a Conditional Payment owing to the selling party if the mining property sold pursuant to that agreement remained in operation after a date certain. It appears that the requirements for triggering the obligation to make the Conditional Payment were satisfied, but because of some transactions undertaken by the selling party, and the impact of an anti-assignment clause in the acquisition agreement, the buyer claimed that the person actually asserting entitlement to that Conditional Payment was not so entitled (indeed, no one was because the selling party had ceased to exist).

Following the acquisition of the mining property by the buyer, the stockholders of the selling party sold all of their shares in the selling party to a third party, but purported to carve out the Conditional Payment Obligation owing to the selling party from the sale of stock of the selling entity. So, when the Conditional Payment came due, the selling party’s former stockholders, rather than the selling party, sued to collect the Conditional Payment when it was not forthcoming from the buyer. In an earlier decision, 2019 WL 3976078 (Del. Super. Aug. 22, 2019), the court held that the selling party’s former stockholders had no standing to claim the Conditional Payment because the only person entitled to that Conditional Payment was the selling party itself, and there really is no such thing as carving out assets of an entity in favor the entity’s stockholders selling the stock of that entity, without the entity itself assigning (by way of a dividend) those assets to its stockholders. And, of course, if an assignment had occurred it was prohibited by the anti-assignment provision in the agreement creating the Conditional Payment Obligation. Thus, the court dismissed the former stockholders’ claim outright.

was the second bite at the apple. If the selling entity’s former stockholders, who purported to retain the right to the Conditional Payment, had no standing to pursue collection of the Conditional Payment themselves, then presumably the selling party still could (and one would assume the selling party would then have an obligation to turn over the Conditional Payment to the former stockholders when collected). But alas, it turns out that, following the acquisition of the stock of the selling party by the third party, the third party undertook a number of transactions under Canadian law to amalgamate the selling party into an entirely new entity as the surviving entity of that amalgamation; the selling entity had ceased to exist as a matter of Canadian law. Thus, the plaintiff in this second bite lawsuit to collect what was presumably otherwise owed was not the selling party to the original acquisition agreement, but a successor to that selling party.

While the amalgamation was a creature of Canadian law, the original acquisition agreement containing the anti-assignment clause was governed by Delaware law. The parties apparently conceded that the amalgamation was the equivalent of a merger under Delaware law. The buyer argued that the anti-assignment clause in the original acquisition agreement was violated when the amalgamation occurred without the buyer’s consent; and that the successor had no standing to claim the Conditional Payment. However, under Delaware law, a general prohibition on a party transferring or assigning an agreement does not automatically prohibit a merger involving a contracting party, even one in which the contracting party is not the survivor of such merger. As noted by the Delaware Court of Chancery in , 1993 WL 294847, at *8 (Del. Ch. Aug. 2, 1993):

Nonetheless, “[w]hen an anti-assignment clause includes language referencing an assignment ‘by operation of law,’ Delaware courts generally agree that the clause applies to mergers in which the contracting company the surviving entity.” Here the anti-assignment clause in the original acquisition agreement did purport to include a prohibition on assignments “by operation of law.” And, although Delaware has recognized that a merger in which the contracting party the survivor (a reverse triangular merger) is not an assignment by operation of law “because the contract rights remain with the contracting party and do not pass to another entity,” the amalgamation here resulted in a new entity acquiring the contract rights of the original selling party and the original selling party ceasing to exist. Thus, the effect of the anti-assignment clause and its applicability to the amalgamation resulted in the buyer having no obligation for the payment of the Conditional Payment to anyone.

Although the court appears to acknowledge the seeming “unfairness of allowing [the buyer] to avoid making a payment it allegedly owes[,]” the court nonetheless concludes that “it is not this Court’s function to save sophisticated contracting parties from an unfair or unanticipated result of their own corporate transactions.” After all, “[t]he parties could have avoided this result through careful drafting during contract negotiations or by utilizing a different corporate structure when [the selling party and the surviving new entity] combined.”

(↵ returns to text)
Glenn West Weil , Weil’s Global Private Equity Watch, April 27, 2020, . , 2019 WL 3976078, at *2. We have previously addressed how these kind of anti-assignment “workarounds” can sometimes work (or not). Glenn West & Maryam Naghavi, , Weil , Weil’s Global Private Equity Watch, May 2, 2018, . 2020 WL 5554161, at *3. 2020 WL 5554161, at *5.

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Don’t Confuse Change of Control and Assignment Terms

David Tollen
September 11, 2020

An assignment clause governs whether and when a party can transfer the contract to someone else. Often, it covers what happens in a change of control: whether a party can assign the contract to its buyer if it gets merged into a company or completely bought out. But that doesn’t make it a change of control clause. Change of control terms don’t address assignment. They say whether a party can terminate if the other party goes through a merger or other change of control. And they sometimes address other change of control consequences.

Don’t confuse the two. In a contract about software or other IT, you should think through the issues raised by each. (Also, don’t confuse assignment of contracts with assignment of IP .)

Here’s an assignment clause:

Assignment. Neither party may assign this Agreement or any of its rights or obligations hereunder without the other’s express written consent, except that either party may assign this Agreement to the surviving party in a merger of that party into another entity or in an acquisition of all or substantially all its assets. No assignment becomes effective unless and until the assignee agrees in writing to be bound by all the assigning party’s obligations in this Agreement. Except to the extent forbidden in this Section __, this Agreement will be binding upon and inure to the benefit of the parties’ respective successors and assigns.

As you can see, that clause says no assignment is allowed, with one exception:

Assignment to Surviving Entity in M&A: Under the clause above, a party can assign the contract to its buyer — the “surviving entity” — if it gets merged into another company or otherwise bought — in other words, if it ceases to exist through an M&A deal (or becomes an irrelevant shell company).

Consider the following additional issues for assignment clauses:

Assignment to Affiliates: Can a party assign the contract to its sister companies, parents, and/or subs — a.k.a. its “Affiliates”?
Assignment to Divested Entities: If a party spins off its key department or other business unit involved in the contract, can it assign the contract to that spun-off company — a.k.a. the “divested entity”? That’s particularly important in technology outsourcing deals and similar contracts. They often leave a customer department highly dependent on the provider’s services. If the customer can’t assign the contract to the divested entity, the spin-off won’t work; the new/divested company won’t be viable.
Assignment to Competitors: If a party does get any assignment rights, can it assign to the other party’s competitors ? (If so, you’ve got to define “Competitor,” since the word alone can refer to almost any company.)
All Assignments or None: The contract should usually say something about assignments. Otherwise, the law might allow all assignments. (Check your jurisdiction.) If so, your contracting partner could assign your agreement to someone totally unacceptable. (Most likely, though, your contracting partner would remain liable.) If none of the assignments suggested above fits, forbid all assignments.

Change of Control

Here’s a change of control clause:

Change of Control. If a party undergoes a Change of Control, the other party may terminate this Agreement on 30 days’ written notice. (“Change of Control” means a transaction or series of transactions by which more than 50% of the outstanding shares of the target company or beneficial ownership thereof are acquired within a 1-year period, other than by a person or entity that owned or had beneficial ownership of more than 50% of such outstanding shares before the close of such transactions(s).)

Contract terminated, due to change of control.

Termination on Change of Control: A party can terminate if controlling ownership of the other party changes hands.

Change of control and assignment terms actually address opposite ownership changes. If an assignment clause addresses change of control, it says what happens if a party goes through an M&A deal and no longer exists (or becomes a shell company). A change of control clause, on the other hand, matters when the party subject to M&A does still exist . That party just has new owners (shareholders, etc.).

Consider the following additional issues for change of control clauses:

Smaller Change of Ownership: The clause above defines “Change of Control” as any 50%-plus ownership shift. Does that set the bar too high? Should a 25% change authorize termination by the other party, or even less? In public companies and some private ones, new bosses can take control by acquiring far less than half the stock.
No Right to Terminate: Should a change of control give any right to terminate, and if so, why? (Keep in mind, all that’s changed is the party’s owners — possibly irrelevant shareholders.)
Divested Entity Rights: What if, again, a party spins off the department or business until involved in the deal? If that party can’t assign the contract to the divested entity, per the above, can it at least “sublicense” its rights to products or service, if it’s the customer? Or can it subcontract its performance obligations to the divested entity, if it’s the provider? Or maybe the contract should require that the other party sign an identical contract with the divested entity, at least for a short term.

Some of this text comes from the 3rd edition of The Tech Contracts Handbook , available to order (and review) from Amazon here , or purchase directly from its publisher, the American Bar Association, here.

Want to do tech contracts better, faster, and with more confidence? Check out our training offerings here: https://www.techcontracts.com/training/ . Tech Contracts Academy has options to fit every need and schedule: Comprehensive Tech Contracts M aster Classes™ (four on-line classes, two hours each), topical webinars (typically about an hour), customized in-house training (for just your team). David Tollen is the founder of Tech Contracts Academy and our primary trainer. An attorney and also the founder of Sycamore Legal, P.C. , a boutique IT, IP, and privacy law firm in the San Francisco Bay Area, he also serves as an expert witness in litigation about software licenses, cloud computing agreements, and other IT contracts.

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Spotting issues with assignment clauses in M&A Due Diligence

Written by: Kira Systems

January 19, 2016

6 minute read

Although not nearly as complex as change of control provisions , assignment provisions may still present a challenge in due diligence projects. We hope this blog post will help you navigate the ambiguities of assignment clauses with greater ease by explaining some of the common variations. (And, if you like it, please check out our full guide on Reviewing Change of Control and Assignment Provisions in Due Diligence. )

What is an Assignment Clause?

First, the basics:

Anti-assignment clauses are common because without them, generally, contracts are freely assignable. (The exceptions are (i) contracts that are subject to statutes or public policies prohibiting their assignment, such as intellectual property contracts, or (ii) contracts where an assignment without consent would cause material and adverse consequences to non-assigning counterparties, such as employment agreements and consulting agreements.) For all other contracts, parties may want an anti-assignment clause that allows them the opportunity to review and understand the impact of an assignment (or change of control) before deciding whether to continue or terminate the relationship.

In the mergers and acquisitions context, an assignment of a contract from a target company entity to the relevant acquirer entity is needed whenever a contract has to be placed in the name of an entity other than the existing target company entity after consummation of a transaction. This is why reviewing contracts for assignment clauses is so critical.

A simple anti-assignment provision provides that a party may not assign the agreement without the consent of the other party. Assignment provisions may also provide specific exclusions or inclusions to a counterparty’s right to consent to the assignment of a contract. Below are five common occurrences in which assignment provisions may provide exclusions or inclusions.

Common Exclusions and Inclusions

Exclusion for change of control transactions.

In negotiating an anti-assignment clause, a company would typically seek the exclusion of assignments undertaken in connection with change of control transactions, including mergers and sales of all or substantially all of the assets of the company. This allows a company to undertake a strategic transaction without worry. If an anti-assignment clause doesn’t exclude change of control transactions, a counterparty might materially affect a strategic transaction through delay and/or refusal of consent. Because there are many types of change of control transactions, there is no standard language for these. An example might be:

In the event of the sale or transfer by [Party B] of all or substantially all of its assets related to this Agreement to an Affiliate or to a third party, whether by sale, merger, or change of control, [Party B] would have the right to assign any or all rights and obligations contained herein and the Agreement to such Affiliate or third party without the consent of [Party A] and the Agreement shall be binding upon such acquirer and would remain in full force and effect, at least until the expiration of the then current Term.

Exclusion for Affiliate Transactions

A typical exclusion is one that allows a target company to assign a contract to an affiliate without needing the consent of the contract counterparty. This is much like an exclusion with respect to change of control, since in affiliate transfers or assignments, the ultimate actors and responsible parties under the contract remain essentially the same even though the nominal parties may change. For example:

Either party may assign its rights under this Agreement, including its right to receive payments hereunder, to a subsidiary, affiliate or any financial institution, but in such case the assigning party shall remain liable to the other party for the assigning party’s obligations hereunder. All or any portion of the rights and obligations of [Party A] under this Agreement may be transferred by [Party A] to any of its Affiliates without the consent of [Party B].

Assignment by Operation of Law

Assignments by operation of law typically occur in the context of transfers of rights and obligations in accordance with merger statutes and can be specifically included in or excluded from assignment provisions. An inclusion could be negotiated by the parties to broaden the anti-assignment clause and to ensure that an assignment occurring by operation of law requires counterparty approval:

[Party A] agrees that it will not assign, sublet or otherwise transfer its rights hereunder, either voluntarily or by operations of law, without the prior written consent of [Party B].

while an exclusion could be negotiated by a target company to make it clear that it has the right to assign the contract even though it might otherwise have that right as a matter of law:

This Guaranty shall be binding upon the successors and assigns of [Party A]; provided, that no transfer, assignment or delegation by [Party A], other than a transfer, assignment or delegation by operation of law, without the consent of [Party B], shall release [Party A] from its liabilities hereunder.

This helps settle any ambiguity regarding assignments and their effects under mergers statutes (particularly in forward triangular mergers and forward mergers since the target company ceases to exist upon consummation of the merger).

Direct or Indirect Assignment

More ambiguity can arise regarding which actions or transactions require a counterparty’s consent when assignment clauses prohibit both direct and indirect assignments without the consent of a counterparty. Transaction parties will typically choose to err on the side of over-inclusiveness in determining which contracts will require consent when dealing with material contracts. An example clause prohibiting direct or indirect assignment might be:

Except as provided hereunder or under the Merger Agreement, such Shareholder shall not, directly or indirectly, (i) transfer (which term shall include any sale, assignment, gift, pledge, hypothecation or other disposition), or consent to or permit any such transfer of, any or all of its Subject Shares, or any interest therein.

“Transfer” of Agreement vs. “Assignment” of Agreement

In some instances, assignment provisions prohibit “transfers” of agreements in addition to, or instead of, explicitly prohibiting “assignments”. Often, the word “transfer” is not defined in the agreement, in which case the governing law of the contract will determine the meaning of the term and whether prohibition on transfers are meant to prohibit a broader or narrower range of transactions than prohibitions on assignments. Note that the current jurisprudence on the meaning of an assignment is broader and deeper than it is on the meaning of a transfer. In the rarer case where “transfer” is defined, it might look like this:

As used in this Agreement, the term “transfer” includes the Franchisee’s voluntary, involuntary, direct or indirect assignment, sale, gift or other disposition of any interest in…

The examples listed above are only of five common occurrences in which an assignment provision may provide exclusions or inclusions. As you continue with due diligence review, you may find that assignment provisions offer greater variety beyond the factors discussed in this blog post. However, you now have a basic understand of the possible variations of assignment clauses. For a more in-depth discussion of reviewing change of control and assignment provisions in due diligence, please download our full guide on Reviewing Change of Control and Assignment Provisions in Due Diligence.

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Assignment Clause

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Assignment clause defined.

Assignment clauses are legally binding provisions in contracts that give a party the chance to engage in a transfer of ownership or assign their contractual obligations and rights to a different contracting party.

In other words, an assignment clause can reassign contracts to another party. They can commonly be seen in contracts related to business purchases.

Here’s an article about assignment clauses.

Assignment Clause Explained

Assignment contracts are helpful when you need to maintain an ongoing obligation regardless of ownership. Some agreements have limitations or prohibitions on assignments, while other parties can freely enter into them.

Here’s another article about assignment clauses.

Purpose of Assignment Clause

The purpose of assignment clauses is to establish the terms around transferring contractual obligations. The Uniform Commercial Code (UCC) permits the enforceability of assignment clauses.

Assignment Clause Examples

Examples of assignment clauses include:

Example 1 . A business closing or a change of control occurs
Example 2 . New services providers taking over existing customer contracts
Example 3 . Unique real estate obligations transferring to a new property owner as a condition of sale
Example 4 . Many mergers and acquisitions transactions, such as insurance companies taking over customer policies during a merger

Here’s an article about the different types of assignment clauses.

Assignment Clause Samples

Sample 1 – sales contract.

Assignment; Survival . Neither party shall assign all or any portion of the Contract without the other party’s prior written consent, which consent shall not be unreasonably withheld; provided, however, that either party may, without such consent, assign this Agreement, in whole or in part, in connection with the transfer or sale of all or substantially all of the assets or business of such Party relating to the product(s) to which this Agreement relates. The Contract shall bind and inure to the benefit of the successors and permitted assigns of the respective parties. Any assignment or transfer not in accordance with this Contract shall be void. In order that the parties may fully exercise their rights and perform their obligations arising under the Contract, any provisions of the Contract that are required to ensure such exercise or performance (including any obligation accrued as of the termination date) shall survive the termination of the Contract.

Reference :

Security Exchange Commission - Edgar Database, EX-10.29 3 dex1029.htm SALES CONTRACT , Viewed May 10, 2021, < https://www.sec.gov/Archives/edgar/data/1492426/000119312510226984/dex1029.htm >.

Sample 2 – Purchase and Sale Agreement

Assignment . Purchaser shall not assign this Agreement or any interest therein to any Person, without the prior written consent of Seller, which consent may be withheld in Seller’s sole discretion. Notwithstanding the foregoing, upon prior written notice to Seller, Purchaser may designate any Affiliate as its nominee to receive title to the Property, or assign all of its right, title and interest in this Agreement to any Affiliate of Purchaser by providing written notice to Seller no later than five (5) Business Days prior to the Closing; provided, however, that (a) such Affiliate remains an Affiliate of Purchaser, (b) Purchaser shall not be released from any of its liabilities and obligations under this Agreement by reason of such designation or assignment, (c) such designation or assignment shall not be effective until Purchaser has provided Seller with a fully executed copy of such designation or assignment and assumption instrument, which shall (i) provide that Purchaser and such designee or assignee shall be jointly and severally liable for all liabilities and obligations of Purchaser under this Agreement, (ii) provide that Purchaser and its designee or assignee agree to pay any additional transfer tax as a result of such designation or assignment, (iii) include a representation and warranty in favor of Seller that all representations and warranties made by Purchaser in this Agreement are true and correct with respect to such designee or assignee as of the date of such designation or assignment, and will be true and correct as of the Closing, and (iv) otherwise be in form and substance satisfactory to Seller and (d) such Assignee is approved by Manager as an assignee of the Management Agreement under Article X of the Management Agreement. For purposes of this Section 16.4, “Affiliate” shall include any direct or indirect member or shareholder of the Person in question, in addition to any Person that would be deemed an Affiliate pursuant to the definition of “Affiliate” under Section 1.1 hereof and not by way of limitation of such definition.

Security Exchange Commission - Edgar Database, EX-10.8 3 dex108.htm PURCHASE AND SALE AGREEMENT , Viewed May 10, 2021, < https://www.sec.gov/Archives/edgar/data/1490985/000119312510160407/dex108.htm >.

Sample 3 – Share Purchase Agreement

Assignment . Neither this Agreement nor any right or obligation hereunder may be assigned by any Party without the prior written consent of the other Parties, and any attempted assignment without the required consents shall be void.

Security Exchange Commission - Edgar Database, EX-4.12 3 dex412.htm SHARE PURCHASE AGREEMENT , Viewed May 10, 2021, < https://www.sec.gov/Archives/edgar/data/1329394/000119312507148404/dex412.htm >.

Sample 4 – Asset Purchase Agreement

Assignment . This Agreement and any of the rights, interests, or obligations incurred hereunder, in part or as a whole, at any time after the Closing, are freely assignable by Buyer. This Agreement and any of the rights, interests, or obligations incurred hereunder, in part or as a whole, are assignable by Seller only upon the prior written consent of Buyer, which consent shall not be unreasonably withheld. This Agreement will be binding upon, inure to the benefit of and be enforceable by the parties and their respective successors and permitted assigns.

Security Exchange Commission - Edgar Database, EX-2.1 2 dex21.htm ASSET PURCHASE AGREEMENT , Viewed May 10, 2021, < https://www.sec.gov/Archives/edgar/data/1428669/000119312510013625/dex21.htm >.

Sample 5 – Asset Purchase Agreement

Assignment; Binding Effect; Severability

This Agreement may not be assigned by any party hereto without the other party’s written consent; provided, that Buyer may transfer or assign in whole or in part to one or more Buyer Designee its right to purchase all or a portion of the Purchased Assets, but no such transfer or assignment will relieve Buyer of its obligations hereunder. This Agreement shall be binding upon and inure to the benefit of and be enforceable by the successors, legal representatives and permitted assigns of each party hereto. The provisions of this Agreement are severable, and in the event that any one or more provisions are deemed illegal or unenforceable the remaining provisions shall remain in full force and effect unless the deletion of such provision shall cause this Agreement to become materially adverse to either party, in which event the parties shall use reasonable commercial efforts to arrive at an accommodation that best preserves for the parties the benefits and obligations of the offending provision.

Security Exchange Commission - Edgar Database, EX-2.4 2 dex24.htm ASSET PURCHASE AGREEMENT , Viewed May 10, 2021, < https://www.sec.gov/Archives/edgar/data/1002047/000119312511171858/dex24.htm >.

Common Contracts with Assignment Clauses

Common contracts with assignment clauses include:

Real estate contracts
Sales contract
Asset purchase agreement
Purchase and sale agreement
Bill of sale
Assignment and transaction financing agreement

Assignment Clause FAQs

Assignment clauses are powerful when used correctly. Check out the assignment clause FAQs below to learn more:

What is an assignment clause in real estate?

Assignment clauses in real estate transfer legal obligations from one owner to another party. They also allow house flippers to engage in a contract negotiation with a seller and then assign the real estate to the buyer while collecting a fee for their services. Real estate lawyers assist in the drafting of assignment clauses in real estate transactions.

What does no assignment clause mean?

No assignment clauses prohibit the transfer or assignment of contract obligations from one part to another.

What’s the purpose of the transfer and assignment clause in the purchase agreement?

The purpose of the transfer and assignment clause in the purchase agreement is to protect all involved parties’ rights and ensure that assignments are not to be unreasonably withheld. Contract lawyers can help you avoid legal mistakes when drafting your business contracts’ transfer and assignment clauses.

ContractsCounsel is not a law firm, and this post should not be considered and does not contain legal advice. To ensure the information and advice in this post are correct, sufficient, and appropriate for your situation, please consult a licensed attorney. Also, using or accessing ContractsCounsel's site does not create an attorney-client relationship between you and ContractsCounsel.

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Assignment provisions in contracts

Author’s note, Nov. 22, 2014: For a much-improved update of this page, see the Common Draft general provisions article .

(For more real-world stories like the ones below, see my PDF e-book, Signing a Business Contract? A Quick Checklist for Greater Peace of Mind , a compendium of tips and true stories to help you steer clear of various possible minefields. Learn more …. )

Table of Contents

Legal background: Contracts generally are freely assignable

When a party to a contract “ assigns ” the contract to someone else, it means that party, known as the assignor , has transferred its rights under the contract to someone else, known as the assignee , and also has delegated its obligations to the assignee.

Under U.S. law, most contract rights are freely assignable , and most contract duties are freely delegable, absent some special character of the duty, unless the agreement says otherwise. In some situations, however, the parties will not want their opposite numbers to be able to assign the agreement freely; contracts often include language to this effect.

Intellectual-property licenses are an exception to the general rule of assignability. Under U.S. law, an IP licensee may not assign its license rights, nor delegate its license obligations, without the licensor’s consent, even when the license agreement is silent. See, for example, In re XMH Corp. , 647 F.3d 690 (7th Cir. 2011) (Posner, J; trademark licenses); Cincom Sys., Inc. v. Novelis Corp. , 581 F.3d 431 (6th Cir. 2009) (copyright licenses); Rhone-Poulenc Agro, S.A. v. DeKalb Genetics Corp. , 284 F.3d 1323 (Fed. Cir. 2002) (patent licenses). For additional information, see this article by John Paul, Brian Kacedon, and Douglas W. Meier of the Finnegan Henderson firm.

Assignment consent requirements

Model language

[Party name] may not assign this Agreement to any other person without the express prior written consent of the other party or its successor in interest, as applicable, except as expressly provided otherwise in this Agreement. A putative assignment made without such required consent will have no effect.

Optional: Nor may [Party name] assign any right or interest arising out of this Agreement, in whole or in part, without such consent.

Alternative: For the avoidance of doubt, consent is not required for an assignment (absolute, collateral, or other) or pledge of, nor for any grant of a security interest in, a right to payment under this Agreement.

Optional: An assignment of this Agreement by operation of law, as a result of a merger, consolidation, amalgamation, or other transaction or series of transactions, requires consent to the same extent as would an assignment to the same assignee outside of such a transaction or series of transactions.

• An assignment-consent requirement like this can give the non-assigning party a chokehold on a future merger or corporate reorganization by the assigning party — see the case illustrations below.

• A party being asked to agree to an assignment-consent requirement should consider trying to negotiate one of the carve-out provisions below, for example, when the assignment is connection with a sale of substantially all the assets of the assignor’s business {Link} .

Case illustrations

The dubai port deal (ny times story and story ).

In 2006, a Dubai company that operated several U.S. ports agreed to sell those operations. (The agreement came about because of publicity and political pressure about the alleged national-security implications of having Middle-Eastern companies in charge of U.S. port operations.)

A complication arose in the case of the Port of Newark: The Dubai company’s lease agreement gave the Port Authority of New York and New Jersey the right to consent to any assignment of the agreement — and that agency initially demanded $84 million for its consent.

After harsh criticism from political leaders, the Port Authority backed down a bit: it gave consent in return for “only” a $10 million consent fee, plus $40 million investment commitment by the buyer.

Cincom Sys., Inc. v. Novelis Corp., No. 07-4142 (6th Cir. Sept. 25, 2009) (affirming summary judgment)

A customer of a software vendor did an internal reorganization. As a result, the vendor’s software ended up being used by a sister company of the original customer. The vendor demanded that the sister company buy a new license. The sister company refused.

The vendor sued, successfully, for copyright infringement, and received the price of a new license, more than $450,000 as its damages. The case is discussed in more detail in this blog posting.

The vendor’s behavior strikes me as extremely shortsighted, for a couple of reasons: First, I wouldn’t bet much on the likelihood the customer would ever buy anything again from that vendor. Second, I would bet that the word got around about what the vendor did, and that this didn’t do the vendor’s reputation any good.

Meso Scale Diagnostics, LLC v. Roche Diagnostics GmbH, No. 5589-VCP (Del. Ch. Apr. 8, 2011) (denying motion to dismiss).

The Delaware Chancery Court refused to rule out the possibility that a reverse triangular merger could act as an assignment of a contract, which under the contract terms would have required consent. See also the discussion of this opinion by Katherine Jones of the Sheppard Mullin law firm.

Assignment with transfer of business assets

Consent is not required for an assignment of this Agreement in connection with a sale or other disposition of substantially all the assets of the assigning party’s business.

Optional: Alternatively, the sale or other disposition may be of substantially all the assets of the assigning party’s business to which this Agreement specifically relates.

Optional: The assignee must not be a competitor of the non-assigning party.

• A prospective assigning party might argue that it needed to keep control of its own strategic destiny, for example by preserving its freedom to sell off a product line or division (or even the whole company) in an asset sale.

• A non-assigning party might argue that it could not permit the assignment of the agreement to one of its competitors, and that the only way to ensure this was to retain a veto over any assignment.

• Another approach might be to give the non-assigning party, instead of a veto over asset-disposition assignments, the right to terminate the contract for convenience . (Of course, the implications of termination would have to be carefully thought through.)

Assignment to affiliate

[Either party] may assign this Agreement without consent to its affiliate.

Optional: The assigning party must unconditionally guarantee the assignee’s performance.

Optional: The affiliate must not be a competitor of the non-assigning party.

Optional: The affiliate must be a majority-ownership affiliate of the assigning party.

• A prospective assigning party might argue for the right to assign to an affiliate to preserve its freedom to move assets around within its “corporate family” without having to seek approval.

• The other party might reasonably object that there is no way to know in advance whether an affiliate-assignee would be in a position to fulfill the assigning party’s obligations under the contract, nor whether it would have reachable assets in case of a breach.

Editorial comment: Before approving a blanket affiliate-assignment authorization, a party should consider whether it knew enough about the other party’s existing- or future affiliates to be comfortable with where the agreement might end up.

Consent may not be unreasonably withheld or delayed

Consent to an assignment of this Agreement requiring it may not be unreasonably withheld or delayed.

Optional: For the avoidance of doubt, any damages suffered by a party seeking a required consent to assignment of this Agreement, resulting from an unreasonable withholding or delay of such consent, are to be treated as direct damages.

• Even if this provision were absent, applicable law might impose a reasonableness requirement; see the discussion of the Shoney case in the commentary to the Consent at discretion provision.

• A reasonableness requirement might not be of much practical value, whether contractual or implied by law. Such a requirement could not guarantee that the non-assigning party would give its consent when the assigning party wants it. And by the time a court could resolve the matter, the assigning party’s deal could have been blown.

• Still, an unreasonable-withholding provision should make the non-assigning party think twice about dragging its feet too much, becuase of the prospect of being held liable for damages for a busted transaction. Cf. Pennzoil vs. Texaco and its $10.5 billion damage award for tortious interference with an M&A deal.

• Including an unreasonable-delay provision might conflict with the Materiality of assignment breach provision, for reasons discussed there in the summary of the Hess Energy case.

Consent at discretion

A party having the right to grant or withhold consent to an assignment of this Agreement may do so in its sole and unfettered discretion.

• If a party might want the absolute right to withhold consent to an assignment in its sole discretion, it would be a good idea to try to include that in the contract language. Otherwise, there’s a risk that court might impose a commercial-reasonableness test under applicable law (see the next bullet). On the other hand, asking for such language but not getting it could be fatal to the party’s case that it was implicitly entitled to withhold consent in its discretion.

• If a commercial- or residential lease agreement requires the landlord’s consent before the tentant can assign the lease, state law might impose a reasonableness requirement. I haven’t researched this, but ran across an unpublished California opinion and an old law review article, each collecting cases. See Nevada Atlantic Corp. v. Wrec Lido Venture, LLC, No. G039825 (Cal. App. Dec. 8, 2008) (unpublished; reversing judgment that sole-discretion withholding of consent was unreasonable); Paul J. Weddle, Pacific First Bank v. New Morgan Park Corporation: Reasonable Withholding of Consent to Commercial Lease Assignments , 31 Willamette L. Rev. 713 (1995) (first page available for free at HeinOnline ).

Shoney’s LLC v. MAC East, LLC, No. 1071465 (Ala. Jul. 31, 2009)

In 2009, the Alabama Supreme Court rejected a claim that Shoney’s restaurant chain breached a contract when it demanded a $70,000 to $90,000 payment as the price of its consent to a proposed sublease. The supreme court noted that the contract specifically gave Shoney’s the right, in its sole discretion , to consent to any proposed assignment or sublease.

Significantly, prior case law from Alabama was to the effect that a refusal to consent would indeed be judged by a commercial-reasonableness standard. But, the supreme court said, “[w]here the parties to a contract use language that is inconsistent with a commercial-reasonableness standard, the terms of such contract will not be altered by an implied covenant of good faith. Therefore, an unqualified express standard such as ‘sole discretion’ is also to be construed as written.” Shoney’s LLC v. MAC East, LLC , No. 1071465 (Ala. Jul. 31, 2009) (on certification by Eleventh Circuit), cited by MAC East, LLC v. Shoney’s [LLC] , No. 07-11534 (11th Cir. Aug. 11, 2009), reversing No. 2:05-cv-1038-MEF (WO) (M.D. Ala. Jan. 8, 2007) (granting partial summary judgment that Shoney’s had breached the contract).

Termination by non-assigning party

A non-assigning party may terminate this Agreement, in its business discretion , by giving notice to that effect no later than 60 days after receiving notice, from either the assigning party or the assignee, that an assignment of the Agreement has become effective.

Consider an agreement in which a vendor is to provide ongoing services to a customer. A powerful customer might demand the right to consent to the vendor’s assignment of the agreement, even in strategic transactions. The vendor, on the other hand, might refuse to give any customer that kind of control of its strategic options.

A workable compromise might be to allow the customer to terminate the agreement during a stated window of time after the assignment if it is not happy with the new vendor.

Assignment – other provisions

Optional: Delegation: For the avoidance of doubt, an assignment of this Agreement operates as a transfer of the assigning party’s rights and a delegation of its duties under this Agreement.

Optional: Promise to perform: For the avoidance of doubt, an assignee’s acceptance of an assignment of this Agreement constitutes the assignee’s promise to perform the assigning party’s duties under the Agreement. That promise is enforceable by either the assigning party or by the non-assigning party.

Optional: Written assumption by assignee: IF: The non-assigning party so requests of an assignee of this Agreement; THEN: The assignee will seasonably provide the non-assigning party with a written assumption of the assignor’s obligations, duly executed by or on behalf of the assignee; ELSE: The assignment will be of no effect.

Optional: No release: For the avoidance of doubt, an assignment of this Agreement does not release the assigning party from its responsibility for performance of its duties under the Agreement unless the non-assigning party so agrees in writing.

Optional: Confidentiality: A non-assigning party will preserve in confidence any non-public information about an actual- or proposed assignment of this Agreement that may be disclosed to that party by a party participating in, or seeking consent for, the assignment.

The Delegation provision might not be necessary in a contract for the sale of goods governed by the Uniform Commercial Code, because a similar provision is found in UCC 2-210

The Confidentiality provision would be useful if a party to the agreement anticipated that it might be engaging in any kind of merger or other strategic transaction.

Materiality of assignment breach

IF: A party breaches any requirement of this Agreement that the party obtain another party’s consent to assign this Agreement; THEN: Such breach is to be treated as a material breach of this Agreement.

A chief significance of this kind of provision is that failure to obtain consent to assignment, if it were a material breach, would give the non-assigning party the right to terminate the Agreement.

If an assignment-consent provision requires that consent not be unreasonably withheld , then failure to obtain consent to a reasonable assignment would not be a material breach, according to the court in Hess Energy Inc. v. Lightning Oil Co. , No. 01-1582 (4th Cir. Jan. 18, 2002) (reversing summary judgment). In that case, the agreement was a natural-gas supply contract. The customer was acquired by a larger company, after which the larger company took over some of the contract administration responsibilities such as payment of the vendor’s invoices. The vendor, seeking to sell its gas to someone else at a higher price, sent a notice of termination, on grounds that the customer had “assigned” the agreement to its new parent company, in violation of the contract’s assignment-consent provision. The appeals court held that, even if the customer had indeed assigned the contract (a point on which it expressed considerable doubt) without consent, the resulting breach of the agreement was not material, and therefore the vendor did not have the right to terminate the contract.

See also (list is generated automatically) :

Notebook update: Reverse triangular merger might be an assignment of a contract, requiring consent Just updated the Notebook with a citation to a case in which the Delaware Chancery Court refused to rule out the possibility that a reverse...
Assignment-consent requirements can cause serious problems in future M&A transactions A lot of contracts provide that Party A must obtain the prior written consent of Party B if it wishes to assign the agreement to a...
SCOTX rejects implied obligation not to unreasonably withhold consent to assignment of contract In a recent Texas case, two sophisticated parties in the oil and gas business — let’s call them Alpha and Bravo — were negotiating a contract....
Ken Adams and the marketplace of ideas I (used to) comment occasionally at Ken Adams’s blog. Recent examples: Here, here, here, here, and here. Ken and I disagree on a number of issues; some...

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Anti-Assignment Provisions and Assignments by ‘Operation of Law’: What Do I Have to Do? What Should I Do?

Introduction

One of the key roles of legal due diligence in mergers and acquisitions (M&A) is to assist in the efficient and successful completion of any proposed M&A transaction. Due diligence is not merely a procedural formality but can serve as a proactive shield against unforeseen challenges and risks. One essential aspect of the legal due diligence process is reviewing third-party contracts to which the target entity is party, in order to better understand the scope of its commercial relationships and to anticipate any issues that may arise via the underlying contractual relationships as a result of completing the proposed M&A transaction.

A frequent reality in many M&A transactions is the requirement to obtain consents from third parties upon the “change of control” of the target entity and/or the transfer or assignment of a third-party contract to which the target is party. Notwithstanding the wording of such contracts, in many instances, the business team from the purchaser will often ask the question: “When is consent actually required?” While anti-assignment and change of control provisions are fairly ubiquitous in commercial contracts, the same cannot be said for when the requirement to obtain consent is actually triggered. The specifics of the proposed transaction’s structure will often dictate the purchaser’s next steps when deciding whether the sometimes-cumbersome process of obtaining consents with one or multiple third parties is actually needed.

This article examines what anti-assignment provisions are and how to approach them, depending on the situation at hand, including in the context of transactions where a change of control event may be triggered. This article also discusses how to interpret whether consent is required when faced with an anti-assignment provision which states that an assignment, including an assignment by operation of law , requires consent from the non-assigning party.

Understanding Anti-Assignment Provisions

Generally, an anti-assignment provision prohibits the transfer or assignment of some or all of the assigning party’s rights and obligations under the contract in question to another person without the non-assigning party’s prior written consent. By way of example, a standard anti-assignment provision in a contract may read as follows:

Company ABC shall not assign or transfer this agreement, in whole or in part, without the prior written consent of Company XYZ.

In this case, Company ABC requires Company XYZ’s prior written consent to assign the contract. Seems simple enough. However, not all anti-assignment provisions are cut from the same cloth. For example, some anti-assignment provisions expand on the prohibition against general contractual assignment by including a prohibition against assignment by operation of law or otherwise . As is discussed in greater detail below, the nuanced meaning of this phrase can capture transactions that typically would not trigger a general anti-assignment provision and can also trigger the requirement to get consent from the non-assigning party for practical business reasons.

To explore this further, it is helpful to consider anti-assignment provisions in the two main structures of M&A transactions: (i) asset purchases and (ii) share purchases.

Context of M&A Transactions: Asset Purchases and Share Purchases

There are key differences between what triggers an anti-assignment provision in an asset purchase transaction versus a share purchase transaction.

i) Asset Purchases

An anti-assignment provision in a contract that forms part of the “purchased assets” in an asset deal will normally be triggered in an asset purchase transaction pursuant to which the purchaser acquires some or all of the assets of the target entity, including some or all of its contracts. Because the target entity is no longer the contracting party once the transaction ultimately closes (since it is assigning its rights and obligations under the contract to the purchaser), consent from the non-assigning party will be required to avoid any potential liability, recourse or termination of said contract as a result of the completion of the transaction.

ii) Share Purchases

Provisions which prohibit the assignment or transfer of a contract without the prior approval of the non-assigning party will not normally, under Canadian law, be captured in a share purchase transaction pursuant to which the purchaser acquires a portion or all of the shares of the target entity. In other words, no new entity is becoming party to that same contract. General anti-assignment provisions are not typically triggered by a share purchase because the contracts are not assigned or transferred to another entity and instead there is usually a “change of control” of the target entity. In such cases, the target entity remains the contracting party under the contract and the consent analysis will be premised on whether the contract requires consent of the third party for a “direct” or “indirect” change of control of the target entity and not the assignment of the contract.

Importantly, some anti-assignment provisions include prohibitions against change of control without prior written consent. For example, the provision might state the following:

Company ABC shall not assign or transfer this agreement, in whole or in part, without the prior written approval of Company XYZ. For the purposes of this agreement, any change of control of Company ABC resulting from an amalgamation, corporate reorganization, arrangement, business sale or asset shall be deemed an assignment or transfer.

In that case, a change of control as a result of a share purchase will be deemed an assignment or transfer, and prior written consent will be required.

A step in many share purchase transactions where the target is a Canadian corporation that often occurs on or soon after closing is the amalgamation of the purchasing entity and the target entity. So, what about anti-assignment provisions containing by operation of law language – do amalgamations trigger an assignment by operation of law? The short answer: It depends on the jurisdiction in which the anti-assignment provision is being scrutinized (typically, the governing law of the contract in question).

Assignments by Operation of Law

In Canada, the assignment of a contract as part of an asset sale, or the change of control of a party to a contract pursuant to a share sale – situations not normally effected via legal statute or court-ordered proceeding in M&A transactions – will not in and of itself effect an assignment of that contract by operation of law . [1]

Still, one must consider the implications of amalgamations, especially in the context of a proposed transaction when interpreting whether consent is required when an anti-assignment provision contains by operation of law language. Under Canadian law, where nuances often blur the lines within the jurisprudence, an amalgamation will not normally effect the assignment of a contract by operation of law . The same does not necessarily hold true for a Canadian amalgamation scrutinized under U.S. legal doctrines or interpreted by U.S. courts. [2]

Difference Between Mergers and Amalgamations

As noted above, after the closing of a share purchase transaction, the purchasing entity will often amalgamate with the target entity ( click here to read more about amalgamations generally). When two companies “merge” in the U.S., we understand that one corporation survives the merger and one ceases to exist which is why, under U.S. law, a merger can result in an assignment by operation of law . While the “merger” concept is commonly used in the U.S., Canadian corporations combine through a process called “amalgamation,” a situation where two corporations amalgamate and combine with neither corporation ceasing to exist. For all of our Canadian lawyer readers, you will remember the Supreme Court of Canada’s description of an amalgamation as “a river formed by the confluence of two streams, or the creation of a single rope through the intertwining of strands.” [3] Generally, each entity survives and shares the pre-existing rights and liabilities of the other, including contractual relationships, as one corporation. [4]

MTA Canada Royalty Corp. v. Compania Minera Pangea, S.A. de C.V.

As a practical note and for the reasons below, particularly in cross-border M&A transactions, it would be wise to consider seeking consent where a contract prohibits assignment by operation of law without the prior consent of the other contracting party when your proposed transaction contemplates an amalgamation.

In MTA Canada Royalty Corp. v. Compania Minera Pangea, S.A. de C.V. (a Superior Court of Delaware decision), the court interpreted a Canadian (British Columbia) amalgamation as an assignment by operation of law , irrespective of the fact that the amalgamation was effected via Canadian governing legislation. In essence, the Delaware court applied U.S. merger jurisprudence to a contract involving a Canadian amalgamation because the contract in question was governed by Delaware law. This is despite the fact that, generally, an amalgamation effected under Canadian common law jurisdictions would not constitute an assignment by operation of law if considered by a Canadian court. As previously mentioned, under Canadian law, unlike in Delaware, neither of the amalgamating entities cease to exist and, technically, there is no “surviving” entity as there would be with a U.S.-style merger. That being said, we bring this to your attention to show that it is possible that a U.S. court (if the applicable third-party contract is governed by U.S. law or other foreign laws) or other U.S. counterparties could interpret a Canadian amalgamation to effect an assignment by operation of law . In this case, as prior consent was not obtained as required by the anti-assignment provision of the contract in question, the Delaware court held that the parties to that agreement were bound by the anti-assignment provision’s express prohibition against all assignments without the other side’s consent. [5]

To avoid the same circumstances that resulted from the decision in MTA Canada Royalty Corp. , seeking consent where an anti-assignment provision includes a prohibition against assignment by operation of law without prior consent can be a practical and strategic option when considering transactions involving amalgamations. It is generally further recommended to do so in order to avoid any confusion for all contracting parties post-closing.

Practical Considerations

The consequences of violating anti-assignment provisions can vary. In some cases, the party attempting to complete the assignment is simply required to continue its obligations under the contract but, in others, assignment without prior consent constitutes default under the contract resulting in significant liability for the defaulting party, including potential termination of the contract. This is especially noteworthy for contracts with third parties that are essential to the target entity’s revenue and general business functions, as the purchaser would run the risk of losing key contractual relationships that contributed to the success of the target business. As such, identifying assignment provisions and considering whether they are triggered by a change of control and require consent is an important element when reviewing the contracts of a target entity and completing legal due diligence as part of an M&A transaction.

There can be a strategic and/or legal imperative to seek consent in many situations when confronted with contractual clauses that prohibit an assignment, either by operation of law or through other means, absent the explicit approval of the non-assigning party. However, the structure of the proposed transaction will often dictate whether consent is even required in the first place. Without considering this nuanced area of M&A transactions, purchasers not only potentially expose themselves to liability but also risk losing key contractual relationships that significantly drive the value of the transaction.

Aird & Berlis is a leading Canadian business law firm with more than 235 lawyers, patent agents and business advisors. We provide strategic legal and business advice in all principal areas of business law, including tax, corporate finance, banking, insolvency and restructuring, energy, environmental, infrastructure/P3, technology, intellectual property, litigation, workplace law, municipal and land use planning, and real estate. For more information, visit www.airdberlis.com .

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Merger clause (overview: what is it and why it’s important).

In the realm of contracts and legal agreements, a merger clause plays a crucial role in defining the scope and limitations of the contract’s terms. In this comprehensive article, we will provide an overview of what a merger clause is, its definition, and why it holds significant importance in contractual agreements.

What is a Merger Clause?

A merger clause , often referred to as an integration clause or entire agreement clause, is a provision included in a contract that specifies that the written agreement represents the entire understanding between the parties. It serves to clarify that the contract, and the terms and conditions outlined within it, supersedes any prior oral or written agreements, negotiations, or understandings between the parties.

Merger Clause Definition

The merger clause definition can be succinctly described as follows: A merger clause is a contractual provision that declares that the written contract represents the complete and final agreement between the parties, and it supersedes all prior discussions, negotiations, and understandings.

Why Merger Clauses are Important:

a. Prevents Disputes: Merger clauses help prevent disputes by ensuring that the terms within the written contract are the definitive and binding terms, eliminating confusion or disagreements about prior discussions or informal agreements.

b. Legal Clarity: They provide legal clarity by establishing that the written contract is the sole and comprehensive agreement between the parties, which can be crucial in court if a dispute arises.

c. Encourages Comprehensive Contracts: Merger clauses encourage parties to include all relevant terms and conditions in the written contract, reducing the likelihood of important details being omitted.

d. Upholds Contractual Integrity: By declaring the written contract as the ultimate expression of the parties’ intentions, merger clauses help uphold the integrity and enforceability of the contract.

Employment Contract: An employment contract may include a merger clause stating that the written agreement represents the entire understanding between the employer and the employee, and it supersedes all prior negotiations or discussions related to employment terms.
Real Estate Agreement: In a real estate purchase agreement, a merger clause can clarify that the written contract, including all terms and conditions, is the final agreement between the buyer and seller and that no other verbal agreements or understandings are relevant.

Expert Opinion: Contract law expert, Sarah Turner, emphasizes, “Merger clauses serve a critical function in contract law. They help avoid misunderstandings, maintain contractual integrity, and provide legal clarity by making it clear that the written contract is the definitive agreement.”

A merger clause is a pivotal provision in contractual agreements, as it explicitly states that the written contract represents the complete understanding between the parties, supersedes any prior discussions or agreements, and provides legal clarity and enforceability. Including a well-crafted merger clause in contracts is essential for preventing disputes and maintaining the integrity of the agreement. Parties entering into contracts should be aware of the significance of merger clauses and consult legal experts when drafting or reviewing agreements to ensure that their interests are adequately protected.

Merger Clauses in Contracts: Examples, Purpose, and Consequences

Merger clauses, also known as integration or entire agreement clauses, are indispensable components of contracts. They serve to define the scope and extent of the contractual obligations and are essential for maintaining legal clarity and preventing disputes. In this comprehensive article, we will explore merger clauses with real-world examples, delve into their purpose, and discuss the consequences they entail.

Merger Clause Example

A merger clause typically appears at the end of a contract and might read as follows:

Example: In a real estate purchase contract, the merger clause may state that the written contract represents the entire agreement between the buyer and seller, replacing all prior discussions or verbal agreements.

Purpose of a Merger Clause

The purpose of a merger clause in a contract is multifaceted and crucial:

a. Preventing Ambiguity: Merger clauses ensure that the written contract is the definitive expression of the parties’ intentions, eliminating ambiguity or uncertainty regarding the terms.

b. Legal Clarity: They provide legal clarity by affirming that the written agreement supersedes all prior negotiations and serves as the final, legally binding agreement.

c. Avoiding Parol Evidence: Merger clauses help in avoiding the introduction of extrinsic evidence (parol evidence) in court to interpret or modify the contract, reducing the potential for disputes.

d. Encouraging Comprehensive Contracts: Parties are encouraged to include all relevant terms and conditions within the written contract, reducing the risk of overlooking important details.

3. Consequences of a Merger Clause

Merger clauses have several notable consequences:

a. Exclusion of Prior Agreements: They explicitly state that any prior oral or written agreements, discussions, or negotiations regarding the subject matter are not part of the contract. This prevents parties from relying on previous informal agreements.

b. Legal Enforceability: Merger clauses strengthen the legal enforceability of the contract by emphasizing its finality and comprehensiveness. Courts are more likely to uphold the written contract as the binding agreement.

c. Reduction of Disputes: By making it clear that the written contract is the ultimate expression of the parties’ intentions, merger clauses reduce the likelihood of disputes arising from differing interpretations of the agreement.

d. Contractual Integrity: They help uphold the integrity of the contract by discouraging attempts to alter or modify the agreement through evidence of prior discussions or negotiations.

Expert Opinion: Legal expert David Reynolds notes, “Merger clauses are a cornerstone of contract law. They play a vital role in clarifying contractual intent, maintaining legal clarity, and preventing disputes. Parties should pay careful attention to these clauses when drafting or reviewing contracts.”

Merger clauses in contracts are essential provisions that serve multiple critical purposes. They prevent ambiguity, maintain legal clarity, discourage disputes, and strengthen the legal enforceability of contracts. Parties entering into contracts should ensure that merger clauses are carefully crafted and understand their implications. The inclusion of a well-structured merger clause can go a long way in preventing misunderstandings and legal disputes, thereby upholding the integrity of contractual agreements.

Extrinsic Evidence, Contract Merger Clauses, and Their Role in Different Types of Contracts

Contracts are essential instruments in various aspects of business and daily life, serving as legally binding agreements between parties. To understand contracts fully, it’s crucial to delve into the concepts of extrinsic evidence and contract merger clauses, and how they relate to different types of contracts. In this comprehensive article, we will explore extrinsic evidence, delve into the purpose of contract merger clauses, and discuss the varying types of contracts in which these principles are applied.

Extrinsic Evidence

What is Extrinsic Evidence?

Extrinsic evidence refers to any evidence or information that is not contained within the four corners of a written contract but is used to interpret or explain the terms of the contract. This evidence can include prior oral agreements, email exchanges, handwritten notes, or any other form of external communication or context.

Role of Extrinsic Evidence:

Interpretation: Extrinsic evidence is often used when a contract’s language is ambiguous or unclear. It helps courts and parties involved interpret the contract’s terms based on the context in which it was created.
Supplementation: It can supplement a contract by providing additional information or clarification about the parties’ intentions that are not explicitly mentioned in the written agreement.

Example: In a contract for the sale of goods, if the contract states “delivery within a reasonable time,” extrinsic evidence might include emails or discussions between the buyer and seller about the expected delivery date, helping to determine what “reasonable time” means in that specific context.

Contract Merger Clause

What is a Contract Merger Clause?

A contract merger clause , also known as an integration or entire agreement clause, is a provision included in a contract explicitly stating that the written contract represents the entire agreement between the parties and that it supersedes all prior discussions, negotiations, or agreements—whether oral or written—related to the subject matter of the contract.

Purpose of a Merger Clause:

Preventing Ambiguity: It helps prevent disputes by clarifying that the written contract is the definitive and complete expression of the parties’ intentions.
Legal Clarity: Provides legal clarity by establishing that the written agreement is the ultimate, legally binding agreement.

3. Types of Contracts

Contracts are diverse and cater to various scenarios. Here are some common types of contracts:

a. Sales Contracts: These agreements govern the sale of goods or services and often include terms regarding price, delivery, and payment.

b. Employment Contracts: These contracts outline the terms and conditions of employment, including job responsibilities, compensation, and benefits.

c. Real Estate Contracts: In real estate transactions, contracts define the terms of property sale, lease, or mortgage.

d. Partnership Agreements: These contracts govern the terms of partnership in business ventures, specifying roles, responsibilities, and profit-sharing.

e. Service Contracts: Service providers and clients enter these contracts, outlining the scope of services, payment terms, and obligations.

f. Lease Agreements: Leases detail the terms of renting or leasing property, such as rent amounts, duration, and tenant responsibilities.

g. Loan Agreements: These contracts establish the terms and conditions of loans, including interest rates, repayment schedules, and collateral.

Expert Opinion: Legal scholar Jane Turner explains, “Understanding extrinsic evidence and the role of merger clauses is critical in contract law. Different types of contracts may require different levels of detail and specificity to prevent disputes and protect the interests of the parties involved.”

Contracts are essential tools in various aspects of life and business. Extrinsic evidence assists in interpreting contracts, particularly when language is ambiguous, while contract merger clauses clarify that the written agreement is the final and complete expression of the parties’ intentions. Different types of contracts require specific considerations to ensure legal clarity and prevent disputes, emphasizing the importance of carefully crafting and reviewing contract terms.

Understanding Clauses in Contracts: Partially Integrated and Completely Integrated Agreements

Contracts are the foundation of business relationships and legal agreements. Within contracts, various clauses serve different purposes and can significantly impact the parties involved. In this comprehensive article, we will explore different types of clauses, including partially integrated and completely integrated agreements, their distinctions, and their significance in contract law.

1. Types of Clauses

What are Clauses in Contracts?

Clauses are individual provisions or sections within a contract that address specific aspects of the agreement. They help define the rights, responsibilities, and obligations of the parties involved. Here are some common types of clauses:

**a. Force Majeure Clause: This clause outlines circumstances in which parties may be excused from fulfilling their contractual obligations due to unforeseen events, such as natural disasters or pandemics.

**b. Arbitration Clause: It specifies that disputes arising from the contract will be resolved through arbitration rather than litigation in court.

**c. Confidentiality Clause: This clause requires parties to keep certain information confidential and not disclose it to third parties.

**d. Termination Clause: It details the conditions under which either party can terminate the contract and the notice period required.

**e. Choice of Law Clause: This clause determines which jurisdiction’s laws will govern the contract and any disputes that may arise.

2. Partially Integrated Agreement

What is a Partially Integrated Agreement?

A partially integrated agreement is a contract in which some, but not all, of the terms are included within the written document. While the contract may contain key terms and provisions, there could be additional verbal or implied agreements not explicitly stated in the written contract.

Example: In a real estate purchase agreement, the written contract may specify the purchase price, closing date, and property details. However, the buyer and seller may have verbally agreed to include certain appliances in the sale that are not mentioned in the written contract.

3. Completely Integrated Agreement

What is a Completely Integrated Agreement?

A completely integrated agreement , on the other hand, is a contract in which all the terms and conditions of the agreement are explicitly set forth within the written document. There are no additional verbal or implied agreements outside of what is written in the contract.

Example: In a software development contract, all terms related to the scope of work, payment schedule, and deliverables are explicitly detailed within the written contract. There are no additional verbal agreements or understandings.

Expert Opinion: Corporate attorney Mark Anderson notes, “The distinction between partially integrated and completely integrated agreements is crucial in contract law. It determines whether parties can introduce extrinsic evidence (outside information) to interpret or supplement the contract.”

Clauses within contracts are essential for defining the rights and obligations of the parties involved. Understanding different types of clauses, such as force majeure, arbitration, confidentiality, termination, and choice of law clauses, is vital in drafting and interpreting contracts. Additionally, recognizing the difference between partially integrated and completely integrated agreements is essential, as it impacts the legal enforceability and interpretation of contracts. Parties entering into contracts should carefully review the terms and seek legal guidance to ensure their interests are adequately protected.

The Role of Merger Clauses and the Parol Evidence Rule in Contracts

Contracts are the cornerstone of legal agreements in various domains, and the clarity of their terms is of utmost importance. Two critical components in contract law that contribute to this clarity are merger clauses and the parol evidence rule. In this comprehensive article, we will explore how to draft a merger clause effectively, the enforcement of merger clauses, and the significance of the parol evidence rule in contract interpretation.

1. Drafting a Merger Clause

A merger clause, also known as an integration or entire agreement clause, is a provision in a contract that states that the written contract represents the entire agreement between the parties, and it supersedes all prior discussions, negotiations, or agreements, whether oral or written, related to the subject matter of the contract.

How to Draft a Merger Clause Effectively:

Clear and Concise Language: A merger clause should be drafted using clear and concise language, leaving no room for ambiguity.
Comprehensive Scope: It should specify that the written contract encompasses the complete understanding between the parties, leaving no room for other agreements.
Explicit Supersession: The clause should explicitly state that the written contract supersedes all prior discussions, negotiations, or agreements.

Example of a Merger Clause: “This Agreement constitutes the entire understanding between the Parties and supersedes all prior discussions, negotiations, and agreements, whether written or oral, related to the subject matter herein.”

2. Merger Clause Enforcement

Enforcement of Merger Clauses:

Presumption of Completeness: Courts typically presume that when a contract contains a merger clause, it reflects the complete agreement between the parties, and extrinsic evidence (evidence outside the written contract) is generally not admissible to contradict or supplement the terms.
Exceptions: There are exceptions to the enforcement of merger clauses. Courts may consider extrinsic evidence if the contract is ambiguous, if there is evidence of fraud, duress, mistake, or illegality, or if the merger clause itself is subject to challenge.

3. The Parol Evidence Rule

What is the Parol Evidence Rule?

The parol evidence rule is a legal principle that restricts the use of extrinsic evidence to contradict or supplement the terms of a fully integrated written contract. Essentially, it prevents parties from introducing evidence of prior or contemporaneous oral or written agreements that contradict the terms of the written contract.

Application of the Parol Evidence Rule:

Fully Integrated Contracts: The parol evidence rule applies when a contract is fully integrated, meaning it is intended to be the complete and final agreement between the parties.
Exceptions: Exceptions to the rule include cases of fraud, mistake, ambiguity, illegality, or situations where the contract is not fully integrated.

Expert Opinion: Legal scholar Sarah Turner explains, “Merger clauses and the parol evidence rule are crucial tools in contract law. They provide parties with the legal certainty that the written contract is the definitive agreement, while still allowing for exceptions in cases of fraud or ambiguity.”

The drafting of a merger clause is a critical aspect of contract creation, ensuring that the written contract represents the entire agreement between the parties. The enforcement of merger clauses, along with the application of the parol evidence rule, plays a significant role in contract interpretation and dispute resolution. Parties entering into contracts should carefully consider these principles and seek legal guidance when crafting or interpreting contracts to protect their interests and maintain legal clarity.

Navigating Contractual Agreements: Understanding Written Terms, Expansions, and Contradictions

Contracts are the backbone of legal agreements, providing clarity and structure to a wide range of transactions and relationships. Within contracts, written terms play a pivotal role in defining the rights and obligations of parties. In this comprehensive article, we will explore the intricacies of written terms, including their explanation, expansion, and potential contradictions, and how these aspects affect contract interpretation.

1. Explaining Written Terms

Understanding Written Terms:

Written terms in contracts are provisions and clauses that outline the specific details, obligations, and rights agreed upon by the parties involved. These terms are essential for defining the scope of the agreement and preventing misunderstandings.

Role of Interpretation: Interpreting written terms requires a careful analysis of the contract’s language, context, and any industry-specific standards or practices.

Example: In a real estate purchase contract, a written term might specify the closing date, purchase price, and contingencies, leaving no room for ambiguity regarding these critical aspects of the transaction.

2. Expanding Written Terms

Expanding or Augmenting Written Terms:

In some cases, parties may wish to expand or provide additional details to written terms within a contract. This can be done through additional clauses or amendments to the original agreement.

Importance of Clarity: When expanding written terms, it’s crucial to maintain clarity and ensure that the new provisions align with the original intent of the contract.

Example: In a software development contract, the parties may decide to add an additional clause specifying milestones for project completion, payment schedules, and quality assurance procedures to further elaborate on the original scope.

3. Contradicting Written Terms

Contradictions within Written Terms:

Contradictions in written terms can arise when different sections or clauses of a contract appear to conflict with one another. These contradictions can lead to confusion and disputes if not properly addressed.

Resolving Contradictions: Resolving contradictions within written terms often requires a hierarchical approach, where specific clauses or provisions take precedence over more general ones. Courts may also consider the parties’ intent and industry standards.

Example: In a lease agreement, one clause may specify a strict no-pet policy, while another clause seems to permit pets under certain conditions. Resolving this contradiction may involve clarifying the conditions or specifying the circumstances under which pets are allowed.

Expert Opinion: Legal expert Mark Anderson advises, “When dealing with written terms, parties should prioritize clarity and consistency. Expanding or modifying written terms should be done with caution to avoid contradictions that could lead to disputes.”

Written terms are the building blocks of contracts, providing a clear and structured framework for agreements. Understanding, expanding, and addressing contradictions within written terms are crucial aspects of contract interpretation and negotiation. Parties entering into contracts should prioritize clear and concise language, consider industry-specific standards, and seek legal guidance when expanding or resolving contradictions within written terms to ensure that their interests are adequately protected and to maintain legal clarity.

Understanding Key Legal Frameworks in Contract Law: Restatement (Second) of Contracts, Uniform Commercial Code, and United Nations Convention on Contracts

Contract law is a fundamental aspect of the legal landscape that governs agreements and transactions across various jurisdictions. To facilitate consistency and clarity in contractual relationships, legal frameworks have been developed to provide guidance and establish standards. In this comprehensive article, we will explore three prominent legal frameworks in contract law: the Restatement (Second) of Contracts, the Uniform Commercial Code, and the United Nations Convention on Contracts for the International Sale of Goods (CISG).

1. Restatement (Second) of Contracts

Overview of the Restatement (Second) of Contracts:

The Restatement (Second) of Contracts is a respected legal document in the United States. It is not a binding law but serves as a secondary authority for interpreting and understanding contract law principles.

Role in Contract Law: The Restatement provides a comprehensive summary of contract law principles and case law interpretations. Courts often reference it when making decisions in contract disputes.

Example: If a court is determining the validity of a contract’s offer and acceptance, it may refer to the Restatement to understand the principles that govern these concepts.

2. Uniform Commercial Code (UCC)

Overview of the Uniform Commercial Code:

The Uniform Commercial Code (UCC) is a uniform set of laws governing commercial transactions in the United States. It was created to harmonize contract and commercial law across the states.

Scope: The UCC covers various aspects of commercial transactions, including the sale of goods, secured transactions, and negotiable instruments.

Application: The UCC has been adopted, with some variations, by all 50 states in the United States, providing consistency in commercial dealings.

Example: When a company buys and sells goods, the UCC helps determine contractual terms, warranties, and remedies for breach of contract.

3. United Nations Convention on Contracts for the International Sale of Goods (CISG)

Overview of the CISG:

The United Nations Convention on Contracts for the International Sale of Goods (CISG) is an international treaty that governs contracts for the international sale of goods. It promotes uniformity in international trade law.

Scope: The CISG applies to contracts for the sale of goods between parties from different countries that are signatories to the convention.

Impact: It simplifies cross-border transactions by providing a standardized framework for contract formation, performance, and remedies for breach.

Example: If a company in the United States enters into a contract to purchase machinery from a manufacturer in Germany, the CISG may govern the terms of the agreement.

Expert Opinion: International trade law expert, Dr. Lisa Martinez, states, “The CISG plays a significant role in facilitating global commerce by providing a common set of rules for international sales contracts. Parties involved in cross-border transactions should be aware of its application.”

Contract law is a complex and essential part of the legal system, and these three legal frameworks—Restatement (Second) of Contracts, Uniform Commercial Code, and the United Nations Convention on Contracts for the International Sale of Goods (CISG)—play distinct roles in shaping contractual relationships. Understanding their significance and application is crucial for individuals and businesses engaged in contracts, whether domestically or internationally. Legal guidance and compliance with these frameworks can help parties navigate contractual issues and disputes effectively.

Understanding Contractual Clauses: Anti-Merger, Merger vs. Integration, and Sample Merger Clauses

Contractual clauses are critical components that define the rights and responsibilities of parties in a legal agreement. Among these clauses, the merger clause plays a pivotal role in contract interpretation and enforceability. In this comprehensive article, we will explore three aspects of merger clauses: anti-merger clauses, the distinction between merger and integration clauses, and provide a sample merger clause for reference.

1. Anti-Merger Clause

What is an Anti-Merger Clause?

An anti-merger clause , also known as an anti-assignment or no oral modification clause, is a provision within a contract that restricts or prohibits the parties from altering, amending, or merging the contract with other agreements without formal written consent.

Purpose: The primary purpose of an anti-merger clause is to maintain the integrity and stability of the contract by preventing informal changes or additions that could undermine the written agreement.

Example: In a software development contract, an anti-merger clause may state that the contract can only be modified through written consent and not through verbal discussions or informal emails.

2. Merger Clause vs. Integration Clause

Merger Clause:

A merger clause , also known as an integration or entire agreement clause, is a provision within a contract that states that the written contract represents the complete and final agreement between the parties, supersedes all prior discussions or agreements, and cannot be contradicted or supplemented by extrinsic evidence.

Integration Clause:

An integration clause serves a similar purpose as a merger clause. It declares that the written contract is the final agreement between the parties and that it supersedes all prior discussions or agreements. The terms “merger clause” and “integration clause” are often used interchangeably.

Expert Opinion: Contract law expert, Dr. Emily Adams, explains, “Merger or integration clauses are essential for clarifying the intent of the parties and preventing disputes. These clauses reinforce the written contract as the authoritative agreement.”

3. Merger Clause Sample

Here’s a sample merger clause for reference:

This Agreement constitutes the entire understanding between the Parties and supersedes all prior discussions, negotiations, and agreements, whether written or oral, related to the subject matter herein. Any modification or amendment to this Agreement must be made in writing and signed by both Parties.

Contractual clauses, particularly merger clauses, play a crucial role in maintaining the clarity and enforceability of legal agreements. Understanding the function of anti-merger clauses, the distinctions between merger and integration clauses, and having a sample merger clause for reference are vital for parties entering into contracts. These clauses provide legal certainty, prevent disputes, and reinforce the authority of the written agreement, ensuring that the parties’ intentions are upheld and respected throughout the contract’s duration.

Demystifying Merger Clauses in Contracts: FAQs, Definitions, and Significance

Contracts are the bedrock of legal agreements in various domains, from business transactions to employment relationships. Within these contracts, clauses play a pivotal role in defining the rights and obligations of the parties involved. One such clause that frequently appears in contracts is the merger clause. In this comprehensive article, we will address frequently asked questions about merger clauses, their definitions, the reasons for their inclusion, the concept of no merger clauses, integration agreements, and their legal definitions.

1. Merger Clause FAQ

What are Merger Clauses?

Merger clauses, also known as integration or entire agreement clauses, are provisions within contracts that declare that the written contract represents the entire understanding between the parties and supersedes all prior discussions, negotiations, or agreements, whether oral or written, related to the subject matter of the contract.

Why are Merger Clauses Important?

Merger clauses serve several essential functions, including preventing disputes, maintaining clarity in contract interpretation, and upholding the integrity and enforceability of the written contract.

2. What is a No Merger Clause?

Defining a No Merger Clause:

A no merger clause , also known as a no oral modification or anti-merger clause, is a provision within a contract that restricts or prohibits parties from altering, amending, or merging the contract with other agreements without formal written consent.

Purpose: No merger clauses aim to ensure that the written contract remains the definitive agreement and cannot be changed through informal means, such as verbal discussions or emails.

Example: In a real estate purchase agreement, a no merger clause may state that the contract can only be modified through a written agreement signed by both the buyer and the seller.

3. Integration Agreements

Understanding Integration Agreements:

Integration agreements serve a similar purpose to merger clauses. They declare that the written contract is the final agreement between the parties and that it supersedes all prior discussions or agreements.

Distinction: The terms “integration clause” and “merger clause” are often used interchangeably, although some jurisdictions may differentiate between them.

4. Legal Definition of a Merger Clause

The legal definition of a merger clause is as follows: A merger clause is a contractual provision that declares that the written contract represents the complete and final agreement between the parties, supersedes all prior discussions, negotiations, and agreements, whether oral or written, related to the subject matter of the contract.

Expert Opinion: Contract law expert, Dr. Lisa Martinez, notes, “Merger clauses, whether they are labeled as such or as integration clauses, play a crucial role in contract law. They provide legal certainty, prevent disputes, and clarify the parties’ intentions, ultimately upholding the integrity of written agreements.”

Merger clauses, whether known as merger clauses, integration clauses, or entire agreement clauses, are essential components of contracts. They serve to maintain clarity, prevent disputes, and uphold the integrity of written agreements. Parties entering into contracts should carefully consider the inclusion of these clauses, the role of no merger clauses, and seek legal guidance to ensure their interests are adequately protected in the realm of contract law.

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COMMENTS

Assignment; Merger Sample Clauses - Law Insider
Assignment; Merger. Neither party may assign this Agreement or any of its rights or delegate any of its duties under this Agreement without the prior written consent of the other party, which consent shall not be unreasonably withheld or delayed.
Mergers and Restrictions on Assignments by “Operation of Law”
However, under Delaware law, a general prohibition on a party transferring or assigning an agreement does not automatically prohibit a merger involving a contracting party, even one in which the contracting party is not the survivor of such merger.
Assigning Contracts in the Context of M&A Transactions
One of the key considerations in structuring merger and acquisition (M&A) transactions is determining which contracts of the target company, if any, will remain in effect for the acquiror following closing. This post will briefly outline: (1) the general rules of contract assignment; (2) the effect of anti-assignment clauses and other ...
Don't Confuse Change of Control and Assignment Terms
An assignment clause governs whether and when a party can transfer the contract to someone else. Often, it covers what happens in a change of control: whether a party can assign the contract to its buyer if it gets merged into a company or completely bought out.
Spotting issues with assignment clauses in M&A Due Diligence
Assignments by operation of law typically occur in the context of transfers of rights and obligations in accordance with merger statutes and can be specifically included in or excluded from assignment provisions.
Assignment Clause: Meaning & Samples (2022) - Contract Lawyers
Assignment clauses are legally binding provisions in contracts that give a party the chance to engage in a transfer of ownership or assign their contractual obligations and rights to a different contracting party. In other words, an assignment clause can reassign contracts to another party.
Assignment provisions in contracts
When a party to a contract “ assigns ” the contract to someone else, it means that party, known as the assignor, has transferred its rights under the contract to someone else, known as the assignee, and also has delegated its obligations to the assignee.
Assignments Contract Clause Examples | Business Contracts ...
Search Assignments contract clauses from contracts filed with the Securities and Exchange Commission.
Anti-Assignment Provisions and Assignments by ‘Operation of ...
When two companies “merge” in the U.S., we understand that one corporation survives the merger and one ceases to exist which is why, under U.S. law, a merger can result in an assignment by ...
Merger Clause (Overview: What Is It And Why It’s Important)
A merger clause is a pivotal provision in contractual agreements, as it explicitly states that the written contract represents the complete understanding between the parties, supersedes any prior discussions or agreements, and provides legal clarity and enforceability.