The current public health crisis has brought a host of additional risks and challenges to Asia. Law firm Akin Gump Strauss Hauer & Feld has shed some light on the commercial and legal risks that businesses are likely to face during this period.
Key contracts – when is a commitment no longer enforceable?
The COVID-19 pandemic is radically altering commercial expectations, creating legal risks and uncertainty for existing contractual relationships.
It may be possible for a party to be excused from the proper performance of a contract, depending on the scope, meaning and effect of a force majeure provision, the application of doctrines such as frustration at common law (or statutory equivalents in jurisdictions across Asia, including mainland China) and other mechanisms, such as termination, material adverse change or change in law.
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The current market dislocation can be expected to give rise to significant disputes focusing on the circumstances in which contracts end, so parties should be extra vigilant about the consequences of premature or wrongful termination, in particular.
Public takeover and privatisation offers – can announced deals be withdrawn?
So-called material adverse change (MAC) conditions to public bids come in various different forms in Asia’s capital markets. In the current crisis, as a matter of contract law, a MAC condition may be available as a way to lapse an announced offer.
However, applicable regulations will require that before the bidder can take that step, at a minimum the situation at issue must be specific to the target group and be so serious that it strikes at the heart of the offer transaction.
A change in market conditions affecting the market or the sector as a whole will not normally be enough to effect a MAC-based withdrawal of the bid, because as a basic principle the offeror is obliged to bear the risks of the market, not target shareholders.
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