Originally from Dispute Resolution Journal

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Parts I and II of this Article, published in the August 2016 and December 2016 issues of Dispute Resolution Journal, covered Pre-Contractual Considerations, Purchase Price Adjustments, Breach of Representation and Warranty, Earnouts, Tax Claims and Material Adverse Effects and Changes. This is the final piece of the article.

VIII.    CLOSING CONDITIONS

When the closing of an acquisition does not occur simultaneously with the signing it means that a number of conditions have to be met for closing to occur.  The agreement typically spells out those conditions and both the buyer and sellers have to fulfill their own conditions.  Some are quite standard, others are heavily negotiated.  

Many agreements also provide that the parties have to exercise some level of efforts to ensure that the conditions are fulfilled.  They range from reasonable commercial efforts to best efforts, with many variations in between.   Disputes can arise as to whether a closing condition has been met or not or whether the party with the conditions has exercised the appropriate level of efforts.  The resolution of the dispute depends on how specifically the particular condition is expressed in the agreement and how the closely the situation post-signing/pre-closing conforms to the condition stated – or whether the party charged to exercise its efforts is really doing so or is conversely dragging its feet to get out of a deal it is no longer happy with..  As such, these disputes tend to be very fact-specific.