Although often overlooked as mere legal boilerplate, the governing law provisions in an acquisition agreement can have subtle but significant effects on interpreting the agreement’s key provisions. Given such potential impact, this article addresses how the selection between two fairly customary choice-of-law jurisdictions, Delaware or New York, can affect certain key liability provisions contained in acquisition agreements. While not an exhaustive comparison of New York and Delaware law, this article highlights the effects that the choice between the laws of these states can have on certain critical contractual provisions. It attempts to assist buyers and sellers alike in better assessing the consequences that the choice of governing law may have on the risk management choices they bargained for in their acquisition agreement.
Law of Damages and Remedies
One area affected by the choice of Delaware or New York law is the ability of the parties to limit liability or select remedies under an acquisition agreement. Absent willful misconduct, both Delaware and New York generally uphold contractual provisions that limit a party’s liability. However, as an exception to this rule and in contrast to Delaware, New York will generally not uphold contractual liability limitations for gross negligence.
