The decision leaves the door open for buyers to argue that inflexible ordinary course covenants can provide a basis to terminate a transaction in which a seller does not suffer an MAE.

Key Points:

..The Delaware Court of Chancery’s ruling illuminates how other courts may analyze pre-closing operational covenants following business disruptions due to the pandemic.

..The court reaffirmed the high bar to establish an MAE, holding that a carveout to an MAE definition need not expressly include “pandemics” in order to apply.

..Depending on the language of an “ordinary course” covenant, even “reasonable” changes to business operations made in response to the pandemic can be a breach.

..The decision highlights the primacy of the language in the purchase agreement: the court will not read language into an ordinary course covenant so as to make the risk allocation between buyer and seller consistent with that provided by an MAE definition. Rather, if the language of an ordinary course covenant is clear, courts will enforce it as written, even if it is inconsistent with the risk allocation provided for in the MAE definition.