Terminating Agreement Snuffed Breach of Contract Claim
Updated: May 10, 2022
Delaware courts have decided that the plaintiff extinguished its breach of contract claims when it elected to terminate a merger agreement before suing the defendant under the terms of a merger agreement.
The defendant argued the merger agreement’s effect of termination clause barred the breach of contract claims. The provision said in the event of any termination of the agreement, the parties' obligations terminate. There will be no liability on the part of any party with limited exceptions, including damages arising out of any fraud occurring before the termination. The termination decision eliminated any potential liability concerning the obligations arising from the merger agreement.
WHY THIS IS IMPORTANT…Parties to agreements should carefully consider the effects of termination provisions on potential claims before terminating.