DealLawyers.com Blog

A recent Cooley blog reviews Delaware case law addressing specific performance and draws some conclusions from those decisions about the circumstances under which a Delaware court is – and is not – likely to order specific performance of a merger agreement. Here’s an excerpt with the key takeaways:

– Control what is in your hands. A party is more likely to get an award of specific performance when most of the conditions to closing the transaction have already been satisfied. If completion of a financing is required, the plaintiffs should specify what actions the court needs to order the buyer to take to complete the financing.

– Keep your side of the street clean. Any party seeking specific performance should make sure that it does not have “unclean hands” that could give the court a basis for denying relief.

– Protect your ability to pursue an array of damages. Make sure the merger agreement includes a very clear specific performance provision where the parties agree that monetary damages are not an adequate remedy, and breach would (not could) result in an irreparable harm. Parties also may want to consider specifying in the provision that the target may seek alternative remedies, including lost premium damages, and an order of specific performance.

– Dissuade delay tactics. Along the same lines, the merger agreement should make clear that the ability to terminate it is suspended while a party is seeking specific performance, thus prohibiting a delaying party from pushing proceedings past the outside date for an easy “out.”

– Consider the best dispute options. When dealing with non-US counterparties, consider which jurisdiction is best for obtaining an order of specific performance against the non-US counterparty, especially when there is no international treaty for mutual recognition of judgments.

– John Jenkins