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Lawyer & Attorney ReferralsMaterial Adverse Effect and Adverse Environment Condition
Posted By James J. Periconi, Esq. on March 27, 2008
Material Adverse Effect: In a sale of any ongoing business, one way to address the difficulty of being absolute in the representations and warranties when in fact the parties are not concerned about the de minimis presence of hazardous materials or damages, is to define Material Adverse Effect.
a. Although the buyer may not want such a clause, for the seller it provides some assurance that it will not be harassed with demands on insignificant issues or that de minimis inaccuracies in the representation and warranties will not trigger a breach of contract action.
b. Material Adverse Effect on an ongoing business may be defined by SEC standards, by a stated dollar amount, or other means. This provision, if used, must be consistent with a deductible amount, or basket, in the indemnity.
Adverse Environment Condition. This definition will be useful in contracts where buyer or lender has the right to perform an environmental site assessment, and to walk from the deal upon discovery of an Adverse Environment Condition. It can be adjoining as: “The presence of Hazardous Materials on the property or on adjoining properties in violation of any Environmental Requirements or in a condition which has caused or is reasonable likely to cause Environments Damages.”
About the author
James J. Periconi, Esq.
James Periconi’s practice focuses almost equally on commercial property transaction counseling, on environmental regulatory matters in the U.S. Environmental Protection Agency and the New York State Department of Environmental Conservation (DEC), and on environmental litigation in the federal and state courts. A former Chief of Solid and Hazardous Waste Enforcement for the State DEC and an Assistant New York Attorney General prosecuting civil and criminal environmental cases, he has in private practice since 1989 had substantial experience representing defendants in governmental actions brought for remediation of Superfund and other contaminated sites, and for prosecution and defense of private cost recovery actions for such sites.
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