In a recent post-trial opinion, the Delaware Superior Court, applying a representations and warranties materiality scrape under an M&A purchase agreement indemnification provision, held that the seller breached its absence of changes representation that no event had occurred that had or reasonably could have an “adverse effect” (as opposed to a material adverse effect) on the acquisition target. In addition, the Court considered the buyer’s claims for fraud and willful misconduct for the representations that were determined to have been breached after applying the materiality scrape. This Legal Update examines in detail the Court’s analysis of the purchase agreement and its application of the materiality scrape and discusses considerations for parties when negotiating materiality scrape provisions.

(more…)