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  • Writer's pictureAli Assareh

Almost all contract negotiations come down to two simple questions.

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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