A LEGAL-USAGE ANALYSIS OF "MATERIAL ADVERSE CHANGE" PROVISIONS

Issues raised by material adverse change (MAC) provisions fall into two categories: those relating to using MAC provisions and - since MAC is generally used as a defined term - those relating to how MAC is defined. In discussing any given issue, this article considers the preferred approach and the more commonly used alternatives. MAC provisions are used in different parts of a contract. They occur most commonly in representations, where they can be used in two different ways. First, a party can make a representation regarding nonoccurrence of a MAC since a given date. Second, a MAC provision can serve to modify a representation as to some aspect of a party's operations so as to indicate the absence of anything leading to a MAC. MACs also occur in closing conditions. Any representation containing a MAC provision could, with a suitable introduction, constitute the basis for a condition.