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Tag Archives: good faith

Sandbagging in Good Faith: How Bhasin v Hrynew Can Impact Indemnification for Known Breaches

Posted in Contractual Matters, Strategy

In the context of a merger or acquisition, a vendor may unknowingly make untrue representations about the target business. “Sandbagging” occurs when a buyer discovers such misrepresentations prior to closing and seeks to enforce indemnity provisions after closing.  The success of such claims will depend on the following:

  • The Terms of the M&A Agreement. If the parties expressly agree that the buyer’s knowledge will (or will not) bar post-closing indemnification, Canadian courts will consider, and likely respect, the parties’ intentions.
  • The Common Law. In Bhasin v Hrynew (“Bhasin”), the Supreme Court of Canada articulated a general duty of
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Hot Off the Press – Canadian Contractual Interpretation Law 3rd Edition

Posted in Contractual Matters

Canadian_Contractual_Interpretation_Law_BookGeoff Hall, senior litigator at McCarthy Tétrault, authors the newly published third edition of Canadian Contractual Interpretation Law. The book clearly sets out the principles governing the interpretation of contracts in Canada, particularly in light of the landmark decisions of the Supreme Court of Canada in Sattva and Bhasin.

These two cases – both of which cited the second edition of Mr. Hall’s book, and were successfully argued by litigators from the firm – transformed contractual interpretation in fundamental ways, firstly by recognizing contractual interpretation as a highly fact-driven exercise and secondly by recognizing an organizing principle … Continue Reading

GOOD FAITH BARGAINING? Recent Decision Implies a Duty to Negotiate in Good Faith

Posted in Contractual Matters, Private Equity, Private Transactions, Strategy

A duty to negotiate in good faith appears to run counter to the adversarial nature of bargaining. However, parties may have a duty to negotiate in good faith according to the recent decision in SCM Insurance Services Inc. v. Medisys Corporate Health LP, 2014 ONSC 2632, where the Ontario Superior Court held that the parties had intended to create “an enforceable obligation” to negotiate in good faith despite no express covenant to do so.

Summary of Facts

In 2011, Medisys sold its independent medical examinations (IME) business to the Plaintiffs and agreed to a five year non-compete and non-solicit … Continue Reading

The Implied Covenant of Good Faith and Fair Dealing: Delaware Rocks On

Posted in Contractual Matters

Earlier this month, the Delaware Court of Chancery released its opinion in Winshall v. Viacom International, Inc. The Court dismissed a claim for breach of the implied covenant of good faith and fair dealing in a merger agreement. The sellers of Harmonix Music Systems, Inc., the creator of the music-oriented video games Rock Band and Guitar Hero, alleged that the buyer, Viacom, breached this implied covenant in connection with an earn-out provision contained in the merger agreement.

The earn-out provision provided the sellers of Harmonix with an opportunity to earn additional cash payments from Viacom in the two years following … Continue Reading