Lawcovernotes October 2013

Minor Amendment/ Major Problem Many transactional matters involve complex documentation – often several interlocking agreements governing various aspects of the whole - and serial variations reflecting the changing terms of the deal negotiated over time. The negotiated variations may require, in turn, fairly straight forward amendments to existing documentation. For example, negotiations may require the substitution of a date for performance of a particular obligation. Often it seems the necessary amendment to the document can made quickly at little cost to the client. Unfortunately, it is not always so simple. Sometimes such an amendment has unintended consequences such as the inadvertent elimination of existing rights or obligations or serious internal inconsistency either within the document itself or within the suite of agreements governing the transaction in its entirety. Examples which have ended up with Lawcover include: 1. The substitution of a legislatively compliant certificate to a binding financial agreement with a superseded certificate arguably rendering an otherwise well drafted and operative agreement inoperative 2. The substitution of a new date for the exercise of an option in an option agreement without a corresponding amendment to the definition of the termof the agreement whichmeant that the agreement expired before the date upon which it could be exercised. The grantee effectively lost the benefit of a negotiated 12 month extension 3. The extension of the termof a put and call option without a corresponding extension of the date by which certain post execution planning conditions were to bemet, effectively rendering the option unconditional 4. An amendment to a guarantee to include a guarantor in his individual capacity without a corresponding amendment to a deed of indemnity extending its benefit to the guarantor Each of these commercial arrangements was of significant monetary value so each of the rights inadvertently forfeited by the errors gave rise to claims quantified in the multi- millions; yet each of the errors was apparently minor and almost clerical in nature. Sometimes, with good will on all sides, the errors can be negotiated away or the Courts may be prepared to rectify the document but this is not always the case. Certainly, it is better to avoid such errors in the first place by considering the documents in their entirety and in the context of the transaction overall to ensure that no other termof the agreement is unintentionally altered or forfeited by the amendment and left unaddressed. Jennifer O’Brien Claims Solicitor