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Almost all contract negotiations come down to two simple questions.

  • Writer: Ali Assareh
    Ali Assareh
  • Mar 16, 2023
  • 1 min read

Almost all contract negotiations, contentious deal points, business wranglings, fancy drafting techniques, come down to these two simple questions:


1. Who has the most information about the risk in question? and

2. Who has the most control over the risk in question?


__________


This thought was prompted by a question yesterday from one of the junior attorneys on my team.


We were going over the Musk/Twitter merger agreement for fun (and educational purposes, of course!).


I was explaining how the Material Adverse Effect Clause ties into the Interim Operating Covenants and Bring-Down of Reps & Warranties, and how all of those affect Deal Certainty and Closing Conditions. He asked how can he follow all those concepts and keep them connected in his mind -- it seemed too complex.


I told him to always go back to the "theory": thinking about the big picture, and what a particular clause is meant to do within that big picture.


All those fancy concepts, I told him, are there to allocate risk using two simple principles:


1. The party who has more information about a risk, should bear that risk.

2. The party who has more control over a risk, should bear that risk.




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