Why Corporate Lawyers Get "Confused" When You Try To Escape Contract Over Material Adverse Changes

Now we know why cellphone companies have been giving customers such a hassle when they try to cancel over material changes to the contract: there’s two possible definitions. Ken Adams, an experienced corporate lawyer who drafts a lot of contracts, says:

According to Black’s Law Dictionary, one meaning of material is “of such a nature that knowledge of the item would affect a person’s decision-making process.”

Another meaning of material is “significant,” in other words “important enough to merit attention.”

Price, for one, is historically know to affect a person’s mind when buying.

Sometimes a cellphone company will try, for instance, to argue that changing a text message rate from .10 to .15 isn’t a big deal, especially if you haven’t used “a lot” of that particular kind of text message. Adams suggests that lawyers use “non-trivial” if they intend the second meaning.

We agree. The more precisely legal definition should be used when lawyers draft a legal contract.

Otherwise, why not use definition 11 (dictionary.com), “pertaining to or characterized by an undue interest in corporeal things; unspiritual,” and argue that there’s no voiding, as the contract is still a celibate? — BEN POPKEN

Rethinking “Material” and “Material Adverse Change” [AdamsDrafting] (Thanks to Peter!)

UPDATE: Scans of Black’s Law Dictionary definition for “material,” inside…



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