Establishing Precedence Clauses in Cross-Border Earn out Agreements
Explicit precedence clauses in cross-border earn-out agreements prevent accounting schedules from overriding core legal risk allocations and governing law provisions.
Share Purchase Agreement Priority
Meaning
Interpretative rules within transaction suites dictate that the primary document governing the equity sale takes precedence over disclosure letters or ancillary service agreements. The share purchase agreement priority ensures that the main commercial terms agreed upon by the principals are not undermined by conflicting details in minor documents. This rule is necessary when a deal involves dozens of separate contracts for intellectual property, employment and physical assets.
Clause Precedence
Precedence of the main agreement applies even if a secondary document was signed more recently. In the event of a contradiction regarding the indemnity cap, the share purchase agreement priority points to the figure in the main contract. This prevents legal teams from accidentally changing the deal terms during the drafting of side letters.
Document Supremacy
Supremacy of the share purchase agreement is usually established in an entire agreement clause. This clause states that the agreement contains all the terms and overrides any prior discussions or subsidiary papers. The share purchase agreement priority reinforces this by ranking the documents in a clear list.
It acts as the final word on the intent of the parties. Every other contract in the closing set is subordinate to this document. This prevents the loss of negotiated benefits through technical errors in schedules.
Interpretation Conflict
Conflicts are resolved by the court or arbitrator by looking at the highest-ranked document first. This hierarchy simplifies the litigation process.