Drafting contracts

(k) No termination or dissolution

In major transactions, the parties, and in particular a seller in the case of a business sale, will exclude the possibility of reversing the transaction. A reversal or rescission of a contract may be sought if a party claims misrepresentation or suffers under a material breach or claims a material lack of conformity of the acquired business (i.e. the business is allegedly not fit for ‘its purpose’).

This refers to three legal concepts the applicability of which would need to be excluded. In the case of mistake, the applicable law may provide that a reversal has its effect ab initio: in such legal system, the deal is declared null and void (and will be deemed never to have existed from a legal point of view). Accordingly, instead of excluding annulment (in a document which will in the end be deemed not to have had legal force and effect), the parties should agree not to request an annulment in court. This is reflected in the following miscellaneous clause:

No termination or anulment. Unless explicitly allowed or stated otherwise in this Agreement, the Parties waive their rights, if any, to (partly) terminate, (partly) annul, (partly) dissolve this Agreement or claim lack of conformity, and agree not to request (partial) annulment or cancellation of this Agreement.