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Chancery Court Takes a Deep Dive into Imprecise Asset Purchase Agreement Language

Posted by on Friday, August 27, 2021 in Delaware Corporate Law Bulletins, En Banc, Volume 74.

Robert S. Reder & Gabrielle M. Haddad | 74 Vand. L. Rev. En Banc 375 (2021) |

Precise language and adherence to market conventions are crucial elements when negotiating and drafting commercial agreements. In Dermatology Assocs. of San Antonio v. Oliver St. Dermatology Mgmt. LLC, No. 2017-0665-KSJM, 2020 WL 4581674 (Del. Ch. Aug. 10, 2020), the Delaware Court of Chancery (“Chancery Court”) was called upon to resolve a dispute between two sophisticated parties over imprecise language in their asset purchase agreement. Due to this imprecision, Vice Chancellor Kathaleen S. McCormick analyzed each and every word of the agreement, together with the circumstances underlying the negotiation process and various contract drafting conventions, to decipher the parties’ intent. The Vice Chancellor’s analysis reveals several instances in which the parties and, more likely, their legal counsel failed to follow drafting conventions that typically promote clarity in commercial agreements.

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Robert S. Reder

Gabrielle M. Haddad