Material adverse effect clause: Copy, customize, and use instantly
Introduction
A material adverse effect (MAE) clause is a common provision in contracts that defines significant negative changes in circumstances that would affect the value or performance of the contract or the involved parties. It allows one party to terminate or renegotiate the contract if such adverse changes occur. This clause is especially useful in mergers, acquisitions, or financial agreements to protect a party from unexpected risks that might materially alter the expected outcome of the deal.
Below are templates for material adverse effect clauses tailored to different scenarios. Copy, customize, and insert them into your agreement.
General material adverse effect
This variation applies to a broad definition of a material adverse effect.
A material adverse effect is any event, change, condition, or occurrence that has, or could reasonably be expected to have, a material adverse effect on the financial condition, operations, or prospects of the party, taken as a whole, or on its ability to perform its obligations under this agreement. This includes, but is not limited to, significant changes in market conditions, regulatory requirements, or financial performance.
Material adverse effect for mergers and acquisitions
This variation applies when an MAE is defined specifically for mergers or acquisitions.
For the purposes of this agreement, a material adverse effect shall mean any change, event, or circumstance that, individually or in the aggregate, has a materially adverse effect on the assets, liabilities, business operations, financial condition, or results of operations of the target company, or that would prevent or delay the closing of the transaction in any material respect.
Material adverse effect for financial transactions
This variation applies when an MAE clause is used in financial transactions.
A material adverse effect shall mean any event or series of events that negatively impacts the financial position or operations of the party to this agreement, including changes in cash flow, debt obligations, or other material financial metrics that significantly impair the ability of the party to meet its obligations under this agreement.
Material adverse effect for the change in law or regulation
This variation applies when an MAE clause is triggered by changes in law or regulation.
A material adverse effect shall include any change in applicable law or regulation that materially and adversely affects the party’s business, operations, or financial performance, including any regulatory or governmental action that imposes new restrictions or obligations on the party that were not anticipated at the time of entering into this agreement.
Material adverse effect for operational disruptions
This variation applies when the MAE clause is triggered by operational disruptions.
A material adverse effect shall include any disruption to the operations of the party, including labor strikes, natural disasters, pandemics, or other force majeure events that prevent or significantly hinder the ability of the party to fulfill its obligations under this agreement, or that materially affect the party’s ability to generate revenue.
Material adverse effect for breach of representations or warranties
This variation applies when an MAE is triggered by a breach of representations or warranties.
A material adverse effect shall occur if any representation or warranty made by the party in this agreement is found to be materially false, misleading, or incomplete, and such breach has, or could reasonably be expected to have, a material adverse effect on the financial condition, operations, or prospects of the party.
Material adverse effect for financial reporting discrepancies
This variation applies when financial reporting discrepancies trigger an MAE clause.
A material adverse effect shall mean any discrepancies or inaccuracies in the financial statements or financial reporting of the party, which, individually or in the aggregate, have or could reasonably be expected to have a material adverse effect on the party’s financial condition or performance under this agreement.
Material adverse effect for loss of key personnel
This variation applies when the loss of key personnel triggers an MAE clause.
A material adverse effect shall include the loss of key personnel who are critical to the execution of this agreement or the performance of the party’s obligations hereunder. The loss of such personnel, without adequate replacement, could reasonably be expected to have a material adverse effect on the operations, financial performance, or prospects of the party.
Material adverse effect for decline in market conditions
This variation applies when market conditions trigger an MAE clause.
A material adverse effect shall mean any substantial and sustained decline in market conditions, including but not limited to, a significant drop in market share, a decline in product demand, or a decrease in the overall value of the party’s assets, which has, or could reasonably be expected to have, a material adverse effect on the financial performance of the party.
Material adverse effect for non-compliance with regulations
This variation applies when non-compliance with regulations triggers an MAE clause.
A material adverse effect shall include any failure by the party to comply with material laws, regulations, or contractual obligations that, individually or in the aggregate, have a material adverse effect on the party’s operations, business, or ability to perform its obligations under this agreement.
Material adverse effect for product failure or recall
This variation applies when a product failure or recall triggers an MAE clause.
A material adverse effect shall include the occurrence of a product failure or recall that results in significant negative consequences for the party’s reputation, operations, or financial position. The product failure or recall must substantially hinder the party’s ability to continue its business or meet its obligations under this agreement.
Material adverse effect for reputational damage
This variation applies when reputational damage triggers an MAE clause.
A material adverse effect shall mean any event or series of events that result in significant reputational damage to the party, including negative public relations or media coverage that materially affects the party’s relationships with customers, suppliers, or partners, and has a material impact on the party’s business operations or prospects.
Material adverse effect for market entry barriers
This variation applies when new market entry barriers trigger an MAE clause.
A material adverse effect shall include the imposition of new market entry barriers or trade restrictions, such as tariffs, embargoes, or other regulatory restrictions, that materially affect the ability of the party to sell or distribute its products in key markets, thereby hindering the party’s financial performance.
Material adverse effect for insurance coverage
This variation applies when changes to insurance coverage trigger an MAE clause.
A material adverse effect shall occur if the party loses or experiences significant changes to its insurance coverage, such as a major decrease in coverage limits, an increase in premiums, or an inability to obtain required insurance, and such changes materially affect the party’s ability to operate its business.
Material adverse effect for changes in customer relationships
This variation applies when changes in customer relationships trigger an MAE clause.
A material adverse effect shall include the loss of key customers or a significant decline in customer relationships that are essential to the party’s business. The loss or deterioration of these relationships, which could reasonably be expected to have a material adverse effect on the party’s revenue and operations, will trigger this clause.
Material adverse effect for access to capital or financing
This variation applies when difficulties in accessing capital or financing trigger an MAE clause.
A material adverse effect shall mean the inability of the party to secure financing, loans, or other forms of capital necessary to meet its obligations under this agreement. Such difficulties in accessing capital, if not addressed, could have a material adverse effect on the party’s financial position and operations.
Material adverse effect for unexpected litigation
This variation applies when unexpected litigation triggers an MAE clause.
A material adverse effect shall include the initiation of any significant litigation or legal action against the party that could materially impact its business operations, financial condition, or ability to perform its obligations under this agreement. The litigation must involve significant claims or damages that could adversely affect the party.
Material adverse effect for termination of key contracts
This variation applies when the termination of key contracts triggers an MAE clause.
A material adverse effect shall include the termination or modification of any key contracts or agreements that are critical to the party’s business operations. The termination or modification of such contracts could reasonably be expected to have a material adverse effect on the party’s ability to fulfill its obligations under this agreement.
Material adverse effect clause for the loss of key suppliers
This variation applies when the loss of key suppliers triggers an MAE clause.
A material adverse effect shall include the loss of key suppliers or the failure of key suppliers to deliver products or services as agreed. Such disruptions can have a significant negative impact on the party’s operations, manufacturing capabilities, and financial performance.
Material adverse effect clause for tax law changes
This variation applies when changes in tax law trigger an MAE clause.
A material adverse effect shall occur if there are significant changes to tax laws or regulations that negatively impact the financial condition, operations, or profitability of the party. Such changes could include new tax liabilities, taxes on transactions, or substantial increases in tax rates.
Material adverse effect clause for regulatory sanctions
This variation applies when regulatory sanctions trigger an MAE clause.
A material adverse effect shall occur if the party becomes subject to any regulatory sanctions or penalties, whether imposed by local or international regulatory bodies. Such sanctions may include fines, suspensions, or bans that materially affect the party’s ability to conduct its business.
Material adverse effect clause for currency fluctuations
This variation applies when significant currency fluctuations trigger an MAE clause.
A material adverse effect shall include any significant and unforeseen fluctuations in currency exchange rates that have a material and adverse impact on the party’s financial condition, operations, or ability to meet its obligations under this agreement.
Material adverse effect clause for inability to meet deadlines
This variation applies when the inability to meet deadlines triggers an MAE clause.
A material adverse effect shall include the failure of the party to meet any agreed-upon deadlines or timelines outlined in this agreement, which has or could reasonably be expected to have a material adverse effect on the party’s ability to fulfill its obligations under the contract.
Material adverse effect clause for changes in ownership structure
This variation applies when changes in the ownership structure trigger an MAE clause.
A material adverse effect shall include any significant changes in the ownership structure of the party, such as mergers, acquisitions, or significant shareholder changes that could affect the party’s ability to perform its obligations under this agreement or alter the overall business operations.
Material adverse effect clause for loss of business licenses
This variation applies when the loss of business licenses triggers an MAE clause.
A material adverse effect shall occur if the party loses, fails to renew, or faces a significant suspension of any business licenses, permits, or regulatory approvals required to operate its business. Such a loss could materially affect the party’s ability to perform under this agreement.
Material adverse effect clause for damage to intellectual property
This variation applies when damage to intellectual property triggers an MAE clause.
A material adverse effect shall occur if the party’s intellectual property, including patents, trademarks, copyrights, or trade secrets, is subject to infringement or becomes significantly compromised, resulting in a material adverse effect on the party’s competitive advantage, brand, or financial position.
Material adverse effect clause for product market withdrawal
This variation applies when the withdrawal of a product from the market triggers an MAE clause.
A material adverse effect shall include the withdrawal or discontinuation of any product, service, or offering from the market that is essential to the party’s revenue streams or business model. The withdrawal of such products would significantly affect the financial performance and market position of the party.
Material adverse effect clause for failure to meet customer expectations
This variation applies when the failure to meet customer expectations triggers an MAE clause.
A material adverse effect shall include any significant failure to meet customer expectations, leading to widespread customer dissatisfaction, negative reviews, or loss of customer loyalty, which could reasonably be expected to adversely affect the party’s business operations and financial position.
Material adverse effect clause for workforce reduction
This variation applies when a significant workforce reduction triggers an MAE clause.
A material adverse effect shall occur if the party is forced to make significant layoffs or workforce reductions that materially affect its ability to perform its obligations under this agreement, impact employee morale, or result in a reduction of operational capacity.
Material adverse effect clause for market competition changes
This variation applies when changes in market competition trigger an MAE clause.
A material adverse effect shall include any substantial increase in market competition, the entry of a new competitor, or the introduction of disruptive technologies that significantly affect the party’s competitive position and profitability within its industry or market.
Material adverse effect clause for loss of government contracts
This variation applies when the loss of government contracts triggers an MAE clause.
A material adverse effect shall include the loss, cancellation, or suspension of any government contracts or agreements that are vital to the party’s revenue stream or operational capabilities. This includes changes in government policies that affect the party’s ability to continue with such contracts.
Material adverse effect clause for litigation outcomes
This variation applies when the outcome of litigation triggers an MAE clause.
A material adverse effect shall include any adverse ruling or outcome in material litigation involving the party, resulting in significant financial liabilities, legal obligations, or reputational harm that could reasonably be expected to materially affect the party’s operations or business prospects.
Material adverse effect clause for bankruptcy proceedings
This variation applies when bankruptcy proceedings trigger an MAE clause.
A material adverse effect shall occur if the party is subject to any bankruptcy or insolvency proceedings, whether voluntary or involuntary, or if the party is unable to pay its debts as they come due, materially affecting its financial condition or ability to perform its obligations under this agreement.
Material adverse effect clause for changes in supply chain conditions
This variation applies when changes in the supply chain trigger an MAE clause.
A material adverse effect shall include any disruption or significant changes in the supply chain that impact the party’s ability to source, manufacture, or deliver products or services on time. Such disruptions could arise from raw material shortages, supply delays, or the loss of key suppliers.
Material adverse effect clause for social unrest or civil disturbance
This variation applies when social unrest or civil disturbance triggers an MAE clause.
A material adverse effect shall occur if the party’s operations are disrupted due to social unrest, civil disturbance, or political instability in the region where the party operates, resulting in the inability to conduct business as usual and a material negative effect on financial performance.
Material adverse effect clause for increase in regulatory compliance costs
This variation applies when an increase in regulatory compliance costs triggers an MAE clause.
A material adverse effect shall include any substantial increase in regulatory compliance costs or changes in regulatory requirements that significantly affect the party’s business operations or financial condition. This includes increased reporting obligations or costs related to compliance with new environmental, health, or safety regulations.
Material adverse effect clause for third-party vendor failure
This variation applies when third-party vendor failure triggers an MAE clause.
A material adverse effect shall include the failure of a key third-party vendor to deliver goods or services necessary for the party’s operations. If such a failure has a material impact on the party’s ability to perform its obligations under this agreement or on the financial condition of the party, it will constitute a material adverse effect.
Material adverse effect clause for loss of trade secrets
This variation applies when the loss of trade secrets triggers an MAE clause.
A material adverse effect shall include the unauthorized disclosure or loss of the party’s trade secrets, intellectual property, or proprietary information. Such an event could have a significant negative impact on the party’s competitive advantage, market position, and ability to perform its obligations under this agreement.
Material adverse effect clause for changes in financial market conditions
This variation applies when changes in financial market conditions trigger an MAE clause.
A material adverse effect shall include any adverse changes in financial market conditions, such as a significant downturn in the stock market, increased volatility, or a liquidity crisis that affects the party’s ability to raise capital or operate within the existing financial structure.
Material adverse effect clause for regulatory enforcement actions
This variation applies when regulatory enforcement actions trigger an MAE clause.
A material adverse effect shall occur if the party is subject to significant enforcement actions by regulatory agencies, such as fines, penalties, or other sanctions that have a material impact on its operations, reputation, or ability to fulfill its obligations under this agreement.
Material adverse effect clause for environmental disasters
This variation applies when environmental disasters trigger an MAE clause.
A material adverse effect shall include the occurrence of an environmental disaster, such as a flood, earthquake, fire, or hazardous materials spill, which disrupts the party’s ability to perform its obligations under this agreement or causes significant damage to its facilities, assets, or inventory.
Material adverse effect clause for supplier failure
This variation applies when a failure of a key supplier triggers an MAE clause.
A material adverse effect shall include the failure of a key supplier to deliver necessary goods or services, which impacts the party’s ability to perform its obligations or deliver the product or service in accordance with the terms of this agreement.
Material adverse effect clause for disruption in technology infrastructure
This variation applies when disruption in technology infrastructure triggers an MAE clause.
A material adverse effect shall include any disruption or failure of the party’s technology infrastructure, such as server outages, cybersecurity breaches, or data loss, that materially affects its ability to conduct business or fulfill its obligations under this agreement.
Material adverse effect clause for credit rating downgrade
This variation applies when a downgrade in credit rating triggers an MAE clause.
A material adverse effect shall include any downgrade of the party’s credit rating by a recognized rating agency that has a material and adverse effect on its ability to access financing or its overall financial position, impairing the party’s ability to meet its obligations under this agreement.
Material adverse effect clause for changes in insurance availability
This variation applies when changes in insurance availability trigger an MAE clause.
A material adverse effect shall occur if the party is unable to maintain sufficient insurance coverage required to operate its business, or if there is a significant increase in insurance premiums that materially affects the financial condition or ability to fulfill obligations under this agreement.
Material adverse effect clause for loss of critical licenses or permits
This variation applies when the loss of critical licenses or permits triggers an MAE clause.
A material adverse effect shall include the loss, suspension, or non-renewal of any critical licenses or permits required for the party to conduct its business operations. This could include business licenses, environmental permits, or health and safety certifications that are material to the party’s operations.
Material adverse effect clause for violation of anti-corruption laws
This variation applies when violations of anti-corruption laws trigger an MAE clause.
A material adverse effect shall include any violation of anti-corruption laws, including bribery or fraud, which could result in legal actions, reputational damage, or regulatory sanctions that materially affect the party’s ability to perform its obligations under this agreement.
Material adverse effect clause for conflict of interest
This variation applies when a conflict of interest triggers an MAE clause.
A material adverse effect shall include the discovery of any conflict of interest that materially affects the party’s ability to perform its duties under this agreement or compromises the integrity of its business operations, including conflicts with key employees or other business entities.
Material adverse effect clause for geopolitical instability
This variation applies when geopolitical instability triggers an MAE clause.
A material adverse effect shall include any geopolitical instability, such as war, terrorism, or civil unrest, that disrupts the party’s ability to operate in a specific region or jurisdiction, thereby materially affecting its ability to fulfill obligations under this agreement.
Material adverse effect clause for product liability claims
This variation applies when product liability claims trigger an MAE clause.
A material adverse effect shall occur if the party is involved in significant product liability claims or lawsuits related to the product covered under this agreement, resulting in substantial financial losses, legal costs, or reputational damage that could impair the party’s ability to fulfill its contractual obligations.
Material adverse effect clause for loss of key distribution agreements
This variation applies when the loss of key distribution agreements triggers an MAE clause.
A material adverse effect shall include the loss, suspension, or non-renewal of any key distribution agreements that are critical to the party’s ability to sell or distribute the product in the designated territory. This could significantly impact the financial performance and operations of the party.
Material adverse effect clause for cyberattack or data breach
This variation applies when a cyberattack or data breach triggers an MAE clause.
A material adverse effect shall occur if the party experiences a cyberattack or data breach that leads to the unauthorized access, loss, or theft of sensitive data, customer information, or intellectual property, resulting in significant financial losses or reputational damage that impacts the party’s operations or performance under this agreement.
Material adverse effect clause for changes in government policy
This variation applies when changes in government policy trigger an MAE clause.
A material adverse effect shall include any changes in government policy or fiscal policy that materially affect the party’s business operations, including new tariffs, trade restrictions, or tax policy changes that hinder the party’s ability to operate profitably in the market.
Material adverse effect clause for inability to meet contractual obligations
This variation applies when a party is unable to meet its contractual obligations.
A material adverse effect shall occur if the party is unable to meet its obligations under this agreement, including delivery of products, provision of services, or performance of key duties, due to circumstances beyond the party’s control, which materially affect its ability to fulfill its obligations.
Material adverse effect clause for a significant decrease in product demand
This variation applies when a significant decrease in product demand triggers an MAE clause.
A material adverse effect shall occur if there is a significant and sustained decrease in demand for the party’s product, which has a material negative impact on the party’s financial position, operational capacity, and ability to fulfill its obligations under this agreement.
Material adverse effect clause for loss of market leadership
This variation applies when the loss of market leadership triggers an MAE clause.
A material adverse effect shall include the loss of market leadership in the product’s category, due to factors such as new competitors, technological advancements, or a shift in consumer preferences, which has a material impact on the party’s revenue and market share.
Material adverse effect clause for violation of data protection laws
This variation applies when a violation of data protection laws triggers an MAE clause.
A material adverse effect shall include any violation of data protection laws, such as breaches of GDPR or other data security regulations, resulting in financial penalties, regulatory action, or reputational harm that materially affects the party’s ability to perform under this agreement.
Material adverse effect clause for changes in operational capacity
This variation applies when changes in operational capacity trigger an MAE clause.
A material adverse effect shall occur if there are significant changes in the operational capacity of the party, such as a reduction in workforce, production capacity, or infrastructure, that materially affect its ability to perform its obligations under this agreement.
Material adverse effect clause for significant customer churn
This variation applies when significant customer churn triggers an MAE clause.
A material adverse effect shall include any significant loss of key customers or clients, or a high rate of customer churn, that materially impacts the financial stability, revenue generation, or market position of the party.
Material adverse effect clause for breach of confidentiality
This variation applies when a breach of confidentiality triggers an MAE clause.
A material adverse effect shall include the unauthorized disclosure of confidential information or intellectual property by the party or its employees, contractors, or affiliates, which could materially affect its business operations, reputation, or competitive standing.
Material adverse effect clause for changes in product quality
This variation applies when changes in product quality trigger an MAE clause.
A material adverse effect shall include any significant deterioration in the quality of the product, including defects, failures, or a decrease in product performance, that could have a material adverse effect on the party’s ability to meet its contractual obligations or maintain customer satisfaction.
Material adverse effect clause for non-compliance with industry standards
This variation applies when non-compliance with industry standards triggers an MAE clause.
A material adverse effect shall include any failure by the party to comply with applicable industry standards, certifications, or best practices that are essential to the performance of its obligations under this agreement, resulting in material adverse consequences to its operations or ability to fulfill its obligations.
Material adverse effect clause for significant increase in liabilities
This variation applies when an increase in liabilities triggers an MAE clause.
A material adverse effect shall occur if there is a significant increase in the party’s liabilities, whether due to legal claims, unpaid debts, or unforeseen financial obligations, that materially impacts the party’s financial stability or its ability to meet obligations under this agreement.
Material adverse effect clause for changes in supply chain dynamics
This variation applies when changes in supply chain dynamics trigger an MAE clause.
A material adverse effect shall include any significant disruption to the party’s supply chain, such as shortages, delays, or increased costs, which materially affect the party’s ability to deliver products or services in accordance with this agreement.
Material adverse effect clause for failure to obtain necessary permits
This variation applies when the failure to obtain necessary permits triggers an MAE clause.
A material adverse effect shall occur if the party is unable to obtain or renew any necessary permits, licenses, or regulatory approvals required for its business operations, leading to a material adverse impact on the party’s ability to meet its obligations under this agreement.
Material adverse effect clause for product liability lawsuits
This variation applies when product liability lawsuits trigger an MAE clause.
A material adverse effect shall include the initiation of product liability lawsuits or claims that could result in substantial financial penalties, settlements, or reputational harm, affecting the party’s ability to perform under this agreement or continue its business operations.
Material adverse effect clause for adverse public relations issues
This variation applies when adverse public relations issues trigger an MAE clause.
A material adverse effect shall include any significant negative publicity or media coverage that damages the party’s reputation, brand value, or public perception, materially affecting the party’s business operations, customer relationships, or financial standing.
Material adverse effect clause for unforeseen technological failures
This variation applies when technological failures trigger an MAE clause.
A material adverse effect shall occur if the party experiences unforeseen technological failures or disruptions, including but not limited to server outages, data breaches, or system crashes, that materially affect the party’s ability to meet its obligations or carry out its business functions.
Material adverse effect clause for failure to obtain financing
This variation applies when a failure to obtain financing triggers an MAE clause.
A material adverse effect shall include the party’s inability to secure necessary financing or capital funding required to support its business operations, expansion plans, or to fulfill its obligations under this agreement.
Material adverse effect clause for change in key market conditions
This variation applies when a change in key market conditions triggers an MAE clause.
A material adverse effect shall occur if there is a significant change in the market conditions that the party operates in, including shifts in customer preferences, market demand, or competitive dynamics, that materially affect the party’s ability to achieve its business objectives or perform under this agreement.
Material adverse effect clause for termination of key partnerships
This variation applies when the termination of key partnerships triggers an MAE clause.
A material adverse effect shall include the termination or non-renewal of key partnerships, strategic alliances, or joint ventures that are essential to the party’s business model or operational success, materially impacting its ability to perform under this agreement.
Material adverse effect clause for changes in political landscape
This variation applies when changes in the political landscape trigger an MAE clause.
A material adverse effect shall include any significant changes in the political landscape, such as changes in government leadership, policies, or international relations, that materially affect the party’s ability to conduct business or meet its obligations under this agreement.
Material adverse effect clause for catastrophic financial misreporting
This variation applies when financial misreporting triggers an MAE clause.
A material adverse effect shall include the discovery of catastrophic financial misreporting or discrepancies in the party’s financial statements that could lead to substantial penalties, loss of investor confidence, or significant regulatory investigations that materially affect the party’s financial standing and business operations.
Material adverse effect clause for natural disasters affecting facilities
This variation applies when natural disasters affect facilities.
A material adverse effect shall occur if any natural disaster, such as a hurricane, flood, or earthquake, materially damages or destroys the party’s facilities or infrastructure, resulting in the inability to conduct business or fulfill obligations under this agreement for a sustained period.
Material adverse effect clause for loss of key employees
This variation applies when the loss of key employees triggers an MAE clause.
A material adverse effect shall include the loss of key employees, executives, or management personnel whose departure has a material impact on the party’s ability to operate effectively, meet obligations, or continue its business operations as agreed under this contract.
Material adverse effect clause for withdrawal of critical financing sources
This variation applies when the withdrawal of critical financing sources triggers an MAE clause.
A material adverse effect shall occur if critical financing sources, such as loans, credit lines, or investor funding, are withdrawn, reduced, or suspended, which materially affects the party’s ability to maintain business operations or fulfill its obligations under this agreement.
Material adverse effect clause for external economic disruptions
This variation applies when external economic disruptions trigger an MAE clause.
A material adverse effect shall include any external economic disruptions, such as an economic recession, inflation, or a severe economic downturn, that materially reduce the party’s ability to perform under this agreement or significantly impair its financial condition.
Material adverse effect clause for unanticipated supply shortages
This variation applies when unanticipated supply shortages trigger an MAE clause.
A material adverse effect shall include any significant unanticipated shortage of supplies or materials that are critical to the party’s business operations or the performance of obligations under this agreement, preventing the party from fulfilling its contractual duties in a timely manner.
Material adverse effect clause for adverse shifts in customer behavior
This variation applies when adverse shifts in customer behavior trigger an MAE clause.
A material adverse effect shall occur if there is a significant shift in customer behavior, such as a drastic reduction in demand, a switch to competitor products, or a significant change in purchasing trends, which could have a material adverse effect on the party’s revenue, profitability, and ability to perform under this agreement.
Material adverse effect clause for withdrawal of government subsidies
This variation applies when the withdrawal of government subsidies triggers an MAE clause.
A material adverse effect shall occur if government subsidies, grants, or financial assistance critical to the party’s operations or business model are reduced, suspended, or terminated, leading to a material adverse impact on the party’s financial condition and ability to perform under this agreement.
Material adverse effect clause for changes in labor laws
This variation applies when changes in labor laws trigger an MAE clause.
A material adverse effect shall include any changes in labor laws or regulations that materially increase the cost of employment or impose new restrictions that significantly affect the party’s ability to operate or fulfill obligations under this agreement, such as increased minimum wage, new labor union mandates, or restrictive employment laws.
Material adverse effect clause for significant changes in competition laws
This variation applies when changes in competition laws trigger an MAE clause.
A material adverse effect shall include any significant changes in competition laws or antitrust regulations that limit or restrict the party’s ability to operate in its market, engage in strategic partnerships, or carry out its business plans as originally intended, materially affecting its market position.
Material adverse effect clause for damage to brand or reputation
This variation applies when damage to brand or reputation triggers an MAE clause.
A material adverse effect shall include any event or series of events that materially damages the party’s reputation or brand, such as negative media coverage, public relations crises, or legal disputes that result in long-term harm to the public perception of the party.
Material adverse effect clause for supplier price increases
This variation applies when significant price increases from suppliers trigger an MAE clause.
A material adverse effect shall include any significant increase in the prices of goods or services from key suppliers that materially affects the party’s ability to maintain profitability or fulfill its obligations under this agreement, especially if such increases are not offset by price increases or cost-saving measures.
Material adverse effect clause for failure of product distribution systems
This variation applies when the failure of product distribution systems triggers an MAE clause.
A material adverse effect shall occur if there is a significant failure in the party’s distribution systems, including warehousing, shipping, or third-party logistics, which prevents the timely and efficient delivery of products to customers, thereby materially affecting the party’s ability to perform under this agreement.
Material adverse effect clause for significant litigation settlements
This variation applies when significant litigation settlements trigger an MAE clause.
A material adverse effect shall include any significant settlement or judgment resulting from litigation, arbitration, or other legal proceedings that results in substantial financial liability or reputational harm to the party, materially affecting its ability to perform under this agreement.
Material adverse effect clause for loss of intellectual property rights
This variation applies when the loss of intellectual property rights triggers an MAE clause.
A material adverse effect shall include the loss, revocation, or invalidation of any key intellectual property rights, including patents, trademarks, or copyrights, that are essential to the party’s business, which materially impacts the party’s ability to operate and meet its obligations under this agreement.
Material adverse effect clause for non-fulfillment of regulatory requirements
This variation applies when the non-fulfillment of regulatory requirements triggers an MAE clause.
A material adverse effect shall include any failure to meet or comply with essential regulatory requirements or approvals necessary for the continued operation of the party’s business or the performance of obligations under this agreement, leading to legal consequences, operational delays, or financial penalties.
Material adverse effect clause for changes in tax treatment
This variation applies when changes in tax treatment trigger an MAE clause.
A material adverse effect shall include any changes in the applicable tax laws or treatment that result in significantly higher tax liabilities for the party, materially affecting its financial position or the financial viability of continuing the performance of this agreement.
Material adverse effect clause for a significant drop in creditworthiness
This variation applies when a significant drop in creditworthiness triggers an MAE clause.
A material adverse effect shall include any significant and sudden decline in the creditworthiness or credit rating of the party, which affects its ability to secure financing or increases its borrowing costs, thereby materially affecting its ability to perform obligations under this agreement.
Material adverse effect clause for loss of government contracts or concessions
This variation applies when the loss of government contracts triggers an MAE clause.
A material adverse effect shall occur if the party loses or has significant government contracts or concessions canceled or not renewed, significantly affecting its revenue and ability to perform under this agreement.
Material adverse effect clause for significant negative changes in industry trends
This variation applies when negative changes in industry trends trigger an MAE clause.
A material adverse effect shall include any significant negative shifts in industry trends, such as a decrease in overall market demand, technological advancements by competitors, or other shifts in industry standards, that materially affect the party’s business operations or profitability.
Material adverse effect clause for loss of key partnerships or joint ventures
This variation applies when the loss of key partnerships or joint ventures triggers an MAE clause.
A material adverse effect shall occur if the party loses any key partnerships or joint ventures critical to its business model, resulting in a material disruption to its operations or the inability to meet obligations under this agreement.
Material adverse effect clause for changes in environmental regulations
This variation applies when changes in environmental regulations trigger an MAE clause.
A material adverse effect shall occur if changes in environmental regulations or policies increase the party’s compliance costs or impose new operational restrictions that materially impact its ability to conduct business or meet obligations under this agreement.
Material adverse effect clause for widespread product recalls
This variation applies when widespread product recalls trigger an MAE clause.
A material adverse effect shall include the occurrence of a widespread product recall, where a significant portion of the products sold by the party is found to be defective, resulting in financial loss, reputational damage, or legal consequences that materially affect the party’s ability to perform under this agreement.
Material adverse effect clause for non-compliance with contractual obligations by third parties
This variation applies when third-party non-compliance triggers an MAE clause.
A material adverse effect shall occur if a key third-party partner, supplier, or distributor fails to comply with their contractual obligations, resulting in a material disruption to the party’s operations or an inability to fulfill its own obligations under this agreement.
Material adverse effect clause for significant loss of revenue sources
This variation applies when the loss of revenue sources triggers an MAE clause.
A material adverse effect shall include the loss of key revenue sources, whether through the termination of major contracts, the withdrawal of funding sources, or a decline in sales, which materially affects the party’s financial stability and ability to perform under this agreement.
Material adverse effect clause for product quality deterioration
This variation applies when product quality deterioration triggers an MAE clause.
A material adverse effect shall include any deterioration in the quality of the product, resulting in a significant number of customer complaints, warranty claims, or damage to brand reputation that materially affects the party’s business operations or ability to fulfill obligations under this agreement.
Material adverse effect clause for violation of export restrictions
This variation applies when violations of export restrictions trigger an MAE clause.
A material adverse effect shall occur if the party violates export restrictions or international trade regulations, leading to legal sanctions, fines, or a loss of business opportunities that materially affect its ability to perform its obligations under this agreement.
Material adverse effect clause for bankruptcy or insolvency of a key counterparty
This variation applies when the bankruptcy or insolvency of a key counterparty triggers an MAE clause.
A material adverse effect shall include the bankruptcy or insolvency of a key counterparty to this agreement, such as a major customer, supplier, or joint venture partner, which materially affects the party’s ability to fulfill its obligations or continue its operations under this agreement.
Material adverse effect clause for loss of competitive advantage
This variation applies when the loss of competitive advantage triggers an MAE clause.
A material adverse effect shall include the loss of competitive advantage, such as the failure to maintain critical technology, intellectual property, or market positioning, which materially reduces the party’s ability to perform under this agreement or meet business objectives.
Material adverse effect clause for regulatory approval delays
This variation applies when delays in regulatory approvals trigger an MAE clause.
A material adverse effect shall occur if the party is unable to obtain the necessary regulatory approvals within the specified timeframes, resulting in material delays or hindrances in its ability to fulfill its obligations under this agreement, leading to significant financial or operational consequences.
Material adverse effect clause for unfavorable economic policy changes
This variation applies when unfavorable economic policy changes trigger an MAE clause.
A material adverse effect shall include any changes in government economic policies, such as sudden changes in taxation, tariffs, or subsidies, that materially impact the party’s ability to conduct business profitably or fulfill its obligations under this agreement.
Material adverse effect clause for adverse changes in insurance terms
This variation applies when changes in insurance terms trigger an MAE clause.
A material adverse effect shall include any significant adverse changes in the terms or costs of the party’s insurance policies, such as increased premiums, reduced coverage, or the inability to secure necessary insurance, which materially affect its ability to operate or fulfill its obligations under this agreement.
Material adverse effect clause for substantial drop in commodity prices
This variation applies when a substantial drop in commodity prices triggers an MAE clause.
A material adverse effect shall occur if there is a substantial and sustained decrease in the prices of key commodities, such as oil, metals, or other raw materials, which significantly impacts the party’s cost structure, profitability, or ability to meet its obligations under this agreement.
Material adverse effect clause for forced closure of manufacturing plants
This variation applies when the forced closure of manufacturing plants triggers an MAE clause.
A material adverse effect shall include the forced closure of one or more of the party’s manufacturing facilities due to government orders, natural disasters, or other unforeseen circumstances, materially affecting the party’s ability to produce goods and fulfill its obligations under this agreement.
Material adverse effect clause for loss of market share
This variation applies when a significant loss of market share triggers an MAE clause.
A material adverse effect shall include the loss of a significant portion of market share to competitors, resulting in a material negative impact on the party’s revenue, profitability, and long-term viability in its industry.
Material adverse effect clause for severe operational disruptions
This variation applies when severe operational disruptions trigger an MAE clause.
A material adverse effect shall include any severe operational disruptions, such as strikes, labor disputes, or equipment failures, that result in the suspension of critical business functions, materially affecting the party’s ability to perform its obligations under this agreement.
Material adverse effect clause for the imposition of import/export restrictions
This variation applies when the imposition of import/export restrictions triggers an MAE clause.
A material adverse effect shall occur if the party faces new or significant import/export restrictions, such as tariffs, quotas, or bans, which materially disrupt its ability to procure or distribute goods necessary for business operations, thus impacting its performance under this agreement.
Material adverse effect clause for disruption in transportation logistics
This variation applies when disruptions in transportation logistics trigger an MAE clause.
A material adverse effect shall include any significant disruptions in transportation logistics, such as shipping delays, port closures, or transportation strikes, that prevent the timely delivery of goods, materially affecting the party’s ability to meet its obligations under this agreement.
Material adverse effect clause for significant IT system failure
This variation applies when a significant IT system failure triggers an MAE clause.
A material adverse effect shall occur if the party experiences a significant IT system failure, including data loss, security breaches, or prolonged system downtime, which materially impairs the party’s ability to conduct its business, meet contractual obligations, or ensure the safety of sensitive data.
Material adverse effect clause for unexpected competition
This variation applies when unexpected competition triggers an MAE clause.
A material adverse effect shall include the emergence of a new competitor or disruptive technology that materially impacts the party’s market position, pricing power, and revenue streams, making it difficult for the party to meet its obligations under this agreement.
Material adverse effect clause for changes in consumer demand patterns
This variation applies when changes in consumer demand trigger an MAE clause.
A material adverse effect shall include any unexpected changes in consumer demand patterns that reduce the market demand for the product or service covered under this agreement, which materially affects the party’s ability to perform under the agreement.
Material adverse effect clause for non-payment by key customers
This variation applies when non-payment by key customers triggers an MAE clause.
A material adverse effect shall occur if key customers fail to pay outstanding invoices or cancel substantial contracts, resulting in significant financial losses that adversely impact the party’s ability to fulfill its obligations under this agreement.
Material adverse effect clause for destruction of critical data
This variation applies when the destruction of critical data triggers an MAE clause.
A material adverse effect shall include the loss, theft, or destruction of critical business data, including customer information, financial records, or intellectual property, which materially affects the party’s ability to operate and meet its obligations under this agreement.
Material adverse effect clause for economic sanctions
This variation applies when the imposition of economic sanctions triggers an MAE clause.
A material adverse effect shall include the imposition of economic sanctions, trade restrictions, or embargoes against the party or its key business partners, which materially impair the party’s ability to perform its obligations under this agreement or disrupt its business operations.
Material adverse effect clause for the loss of key employees
This variation applies when the loss of key employees triggers an MAE clause.
A material adverse effect shall include the resignation, departure, or loss of key employees whose expertise, leadership, or specialized knowledge is critical to the party’s ability to perform its obligations under this agreement.
Material adverse effect clause for the failure of a strategic partnership
This variation applies when the failure of a strategic partnership triggers an MAE clause.
A material adverse effect shall include the termination or failure of a strategic partnership or joint venture that materially affects the party’s ability to conduct business, generate revenue, or meet obligations under this agreement.
Material adverse effect clause for sudden increase in costs of raw materials
This variation applies when a sudden increase in the costs of raw materials triggers an MAE clause.
A material adverse effect shall include any substantial and unexpected increase in the costs of raw materials or key inputs required for the party’s business, which has a material negative effect on profitability and the party’s ability to fulfill its obligations under this agreement.
Material adverse effect clause for severe market downturns
This variation applies when a severe market downturn triggers an MAE clause.
A material adverse effect shall occur if there is a severe and sustained downturn in the market or economy, leading to a material reduction in the party’s revenue, market value, or ability to meet obligations under this agreement.
Material adverse effect clause for change in pricing laws
This variation applies when changes in pricing laws trigger an MAE clause.
A material adverse effect shall include any significant changes in pricing laws or regulations, such as price controls, which materially impact the party’s ability to set prices or maintain profitability in connection with the performance of obligations under this agreement.
Material adverse effect clause for adverse changes in health and safety regulations
This variation applies when changes in health and safety regulations trigger an MAE clause.
A material adverse effect shall include any significant changes in health and safety regulations that materially affect the party’s operations, increase its operational costs, or require significant adjustments to business practices to comply with new regulations.
Material adverse effect clause for loss of strategic market access
This variation applies when loss of strategic market access triggers an MAE clause.
A material adverse effect shall occur if the party loses access to key markets, either due to regulatory changes, geopolitical events, or other factors that significantly hinder its ability to operate in critical regions, affecting its ability to meet its obligations under this agreement.
This article contains general legal information and does not contain legal advice. Cobrief is not a law firm or a substitute for an attorney or law firm. The law is complex and changes often. For legal advice, please ask a lawyer.