The outbreak of 2019 novel coronavirus disease (COVID-19) has engulfed the world. Canada has not been spared. The onset of the pandemic may impact agreements that provide for a shift in exogenous risk between contract parties through a material adverse effect (MAE) or material adverse change (MAC) clause. A MAE or MAC clause may be found in a wide variety of agreements, including share and asset purchase agreements used in mergers and acquisitions (M&A) transactions, loan agreements, underwriting agreements and commodity derivative contracts. This Legal Update considers, from a Canadian common law perspective, how MAE and MAC clauses have been interpreted in Canada and how they are likely to be interpreted in the future in light of legal developments in the US.

Note: This practice note is no longer being updated. The current, maintained Practical Law Canada resource on this topic is Practice Note, Material Adverse Effect Clauses After Fairstone Financial.