Henkel Corp v. Innovative Brands Holdings , LLC.,(Del. Ch., Aug. 26, 2008), read opinion here.
This Chancery Court case involved a Material Adverse Change (MAC) clause and a Material Adverse Effect (MAE) clause, and whether there was a deadline by which one party had to decide if such a clause was triggered. However, the court did not interpret the MAC or MAE clause per se. Rather, the court held that:
when a contract does not provide for a specific deadline, depending on the circumstances, the court will impose a "reasonable period of time" as a deadline.
The procedural posture of this case is slightly unusual and did not allow the court to pick a specific date for the deadline. Henkel sued to force IBH to close on the purchase. IBH counterclaimed to seek a declaratory judgment that it did not need to close until all conditions were met. Henkel moved to dismiss the counterclaim–also arguing that IBH could not indefinitely refrain from deciding to waive the MAC or terminate the contract while it continued to allege that the alleged failure of Henkel to establish the absence of a MAC relieved it of any obligation to close of the purchase.
The agreement did not give IBH a deadline by which they had to make a decision about terminating or waiving due to the absence of a MAC. Meanwhile, IBH sought to hold Henkel to a no-shop provision that prevented Henkel from looking for other buyers during the interim. The court could not impose an exact deadline based on the procedural posture of a motion to dismiss but noted that it was unlikely that the parties contemplated an unlimited duration of time for IBH to make a decision on waiver or termination if the seller did not satisfy the requirement that there be an "absence of a MAC".