How do you interpret the term ‘the purpose’ in an acquisition contract?
A recent High Court case has considered the possible ways of interpreting the words ‘the purpose’ in a contract between a seller and a buyer of a business. The phrase was used in the context of an earn-out or ‘contingent value right’ provision where transactions undertaken for ‘the purpose’ of reducing payments to one of the parties could nevertheless be factored into the relevant calculation.
The central issue for the parties in Starbev GP Ltd v Interbrew Central European Holdings BV  EWHC 1311 was what, if any, consideration was due under a deferred consideration provision. The High Court queried whether a certain instrument fell within the definition of a transaction ‘structured or undertaken… with the purpose of reducing the payments due to [the seller]’ and the court considered how to interpret the term ‘the purpose’.
While contractual interpretation will turn on the facts of each individual case and what the parties reasonably intend (in this case, with some fairly complex and highly technical drafting), the Starbev judgment could also apply in similar contexts and is therefore of general interest…
Click on the link below to read the rest of the Kemp Little briefing.
Sign in or Register to continue reading this article
It's quick, easy and free!
It takes just 5 minutes to register. Answer a few simple questions and once completed you’ll have instant access.Register now
Why register to The Lawyer
In-depth, expert analysis into the stories behind the headlines from our leading team of journalists.
Identify the major players and business opportunities within a particular region through our series of free, special reports.
Receive your pick of The Lawyer's daily and weekly email newsletters, tailored by practice area, region and job function.
More relevant to you
To continue providing the best analysis, insight and news across the legal market we are collecting some information about who you are, what you do and where you work to improve The Lawyer and make it more relevant to you.