In Collab9, LLC vs. En Pointe Techs. Sales, LLC a seller argued that the tacit confederation of good faith and fair trade required the buyer to maximize a provision for merit in an asset purchase agreement (APA). The seller asserted that the purchaser had breached the duty of good faith and fair trade by maintaining “financial documents in a way that makes it impractical to accurately determine the correct amounts of earn-out payments; creating authenticity to transfer the recipes from [his] books; and the renewal of certain contracts or the transfer of distribution or account personnel as a means of reducing adjusted gross margin.  The earnout provisions are so specific to the facts and adapted to individual circumstances in a deal that the seller or buyer may be for or against the inclusion of a earnout depending on the conditions. In other words, unlike many other provisions of sales contracts, there is no position of buyer or seller defined for profit or against a salary. These decisions reflect the way Delaware courts understand the incentives that underlie the provisions and details of their bargains. Concessions could now lead to the agreement, but buyers should be aware that they can accept significant restrictions on the way they carry out the transaction after the closure and, as Merrit Quarum shows, there is a risk of simultaneous trial if the salary is not reached. This applies to sellers who have contrary incentives and who may relinquish their ability to hold buyers to account after closing. In other words, the objective of analyzing future litigation (particularly in oral arguments) exposes buyers to a higher risk (and sellers have greater leverage) if they are to comply with certain wage provisions that impose obligations on the buyer after closing.
In the analysis of merit provisions that do not require specific obligations and give the purchaser significant discretion in the business, unspoken claims represent an increase, with Delaware courts refusing to use the federal government to “provide contractual protection to the parties that they did not secure at the bargaining table.”  Finally, more than half of the agreements reviewed in the ABA studies, which included a salary, also contained a right of compensation. Although the inclusion of a right of mark-up decreased significantly in the last study. In an action alleging, among other things, non-compliance with the compensation agreement, the seller argued a breach of the contract, not unspoken contractual rights. Unlike Collab9, the Tribunal rejected the buyer`s request to reject some of the seller`s claims of merit, focusing on the first and third commitments of the compensation agreement. With respect to the third obligation in the wage contract, the purchaser argued that the seller could not rely on damages arising from the buyer`s decision to build an alternative bridge between the parties` systems. Referring to Delaware`s minimum standard of damages – which does not require “specific action or harm,” the court concluded that it was reasonable to conclude from the agreement that a specific solution was necessary to provide services to customers and calculate the amount of realization, and that if that solution was not built, it could cause harm.  Note that in this article, we use the terms “seller” and “company” in the context of a share purchase transaction – the “seller” would be the shareholder (s) seller (s) who takes the insurance and guarantees in the contract of sale of M-D, and the “company” would be the company to acquire.