Jurisdiction(s):
United Kingdom

Travelport v WEX: construing material adverse effect (MAE) clauses, proving disproportionate effect, and defining the relevant industry under English law during the COVID-19 pandemic

Published on: 20 October 2020

Published by a LexisNexis Dispute Resolution expert

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Article summary

Travelport Ltd and others v Wex Inc; Olding and others v Wex Inc [2020] EWHC 2670 (Comm)

What are the practical implications of this case?

In this matter, the intricate MAE provision contained numerous carve-outs stating that specified circumstances were not to count as a material adverse effect; however, those carve-outs were themselves qualified by a further proviso allowing certain matters to be considered where they had a disproportionate impact on either of the two corporate groups when set against appropriate industry comparators, each group being viewed in the round collectively. The degree of abstraction (e.g. no express definition of what amounted to 'material') left significant room for contention over the contract’s interpretation. There was little English authority addressing the proper approach to construing provisions of this kind. Its layered structure—exceptions upon exceptions with a disproportionate-effect gateway—invited debate about scope and application across the contract as a whole. With each group assessed on a collective basis against sector participants, arguments as to comparators and benchmarks were likely. It is suggested that parties dealing with MAE clauses, and their advisers, should exercise care regarding the operation of these provisions under English law, and that consideration might usefully be given...

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