In a decision that resonates with the global market, the Nevada Supreme Court ruled that a temporary closure due to the ongoing pandemic isn’t a violation of the “ordinary course” covenant. The term “ordinary course” is frequently used in merger and acquisition agreements with the intent of assuring the buyer that there will be no substantial changes to the business during the period between the signing of the purchase agreement and its final closure.
The lawsuit in question, as explained by the JDSupra report, involved a seller who temporarily closed the business due to COVID-19. The buyer contended that this constituted a violation of their agreement, as it deviated from the ordinary operational norms of the concern. This case therefore brings into the limelight the interpretation of “ordinary course” in unprecedented circumstances such as global pandemics.
The Nevada Supreme Court’s decision emphasized that, in times of a pandemic, temporary closures could be considered an operation in the ordinary course. This ruling is significant because it sets a precedent that could influence how courts in other jurisdictions approach similar disputes.
While this case has offered some clarity, businesses and law firms will continue to grapple with unexpected challenges brought on by the pandemic. It reinforces the need for thorough due diligence and careful drafting of legal documents during these uncertain times. With future global emergencies in mind, new interpretations and adaptations of conventional contractual agreements may be necessitated.
The landscape is clearly shifting, making it crucial for legal professionals to stay abreast with such landmark rulings. Firms and corporations worldwide would be prudent to take cues from this unfolding legal perspective when negotiating future agreements.