Contract Glossary
Material Adverse Change (MAC) Clause
Definition
A Material Adverse Change (MAC) clause gives one party the right to walk away from a deal if something significantly negative happens to the other party's business, finances, or operations between signing and closing.
In Practice
A company agrees to acquire a smaller firm for $20 million. Between signing and closing, the target loses its largest customer — 40% of revenue. The acquirer invokes the MAC clause. Whether this qualifies depends on the clause language and carve-outs.
Common in these contract types
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Frequently asked questions about material adverse change (mac) clause
Courts look for changes that substantially threaten earnings potential over a commercially reasonable period. Lost key customers, regulatory actions, and loss of critical employees have all triggered MAC clauses.
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Create your contractThis content is for informational purposes only and does not constitute legal advice. For contracts with significant financial or legal implications, review by a qualified attorney is recommended.