A Settlement & Mutual Release Agreement resolves disputes and releases parties from future claims. This playbook outlines negotiation of consideration, confidentiality, and release scope.
Why This Matters: Detailed conditions precedent safeguard against closing in the absence of essential information or approvals. This prevents unwanted deal completion and unexpected liabilities.
Negotiation strategy
If you're the Party A:
Ensure all conditions precedent are clearly defined and include specific deadlines. This will protect your interests and provide a structured exit if conditions are unmet.
If you're the Party B:
Negotiate for reasonable timelines and conditions that are within your control to fulfill. Ensure that any conditions precedent are not overly burdensome or vague.
Essential elements
1
Regulatory Approvals
Necessary governmental approvals required.
2
Material Consents
Essential consents from third parties.
3
Objective Conditions
Specific conditions to be satisfied.
Action framework
ACCEPT
Propose edits if conditions are too vague or lack specific deadlines.
EDIT
Reject if conditions precedent are impossible to meet or overly burdensome.
ADD
Add new language if specific regulatory or consent requirements are missing.
PRO TIP
Always align conditions precedent with your strategic goals and risk tolerance to avoid unforeseen liabilities.
Example clauses
FAVORABLE
Preferred Regulatory Approvals
"The Closing of the transaction is subject to the receipt of all necessary regulatory approvals from relevant governmental authorities. Each party shall use its reasonable best efforts to obtain such approvals as promptly as practicable, and in any event, no later than [insert specific date]."
NEUTRAL
Standard Material Consents
"Prior to Closing, the Seller must obtain all material consents required under any contract to which it is a party, where the failure to obtain such consent would have a material adverse effect on the transaction. Such consents must be obtained and delivered to the Buyer no later than [insert specific date]."
UNFAVORABLE
Unclear Objective Conditions
"The obligations of the Buyer to consummate the Closing are subject to the satisfaction of conditions precedent, which are not clearly defined or time-bound."
Fallbacks
High-Risk Projects
In high-risk projects, conditions precedent should include additional safeguards and more stringent requirements to mitigate potential risks.
Cross-Border Transactions
For cross-border transactions, ensure conditions precedent address specific regulatory approvals from all relevant jurisdictions to avoid legal complications.
Time-Sensitive Deals
In time-sensitive deals, conditions precedent should have clear deadlines to ensure timely completion and avoid unnecessary delays.
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