MAC/MAE, Break Fees and Statutory Relief: Managing M&A Deal Risk Amid Regional Disruptions 

Across the GCC, businesses are operating in an increasingly unpredictable environment, shaped by regional hostilities, expanding sanctions exposure, supply-chain disruption, and volatility in energy markets. Against this backdrop, Kuwait-linked M&A transactions are raising two recurring questions: 

1. whether parties can rely on material adverse change (MAC) / material adverse effect (MAE) clauses to step away from signed transactions; and 
2. whether parties can discontinue ongoing negotiations without exposure to break fees. 

What you need to know 

MAC/MAE is contractual 

MAC/MAE provisions operate only where the contract wording and mechanics clearly permit it (for example as a condition precedent, bring-down condition, or express termination right). 

Carve-outs matter 

MAC/MAE definitions may exclude events such as war or hostilities, sanctions, changes in law, general market disruption, or broader economic or financing conditions, often subject to a “disproportionate effect” qualifier.  

Force majeure (Article 215, Kuwait Civil Code) 

Relief may arise where performance becomes objectively impossible due to circumstances beyond the obligor’s control. The threshold is high and generally will not be satisfied by increased costs, inconvenience, or ordinary delay. 

 Commercial hardship (Article 198, Kuwait Civil Code) 

Where exceptional and unforeseeable events make performance excessively onerous but not impossible, and expose the obligor to substantial loss, Kuwaiti courts may intervene to rebalance contractual obligations. The remedy is typically adjustment rather than termination. 

 Negotiations and break fees 

Parties can usually discontinue negotiations unless they have entered into a binding LOI, term sheet, exclusivity arrangement, or break-fee undertaking. However, negotiating conduct may still create good-faith or reliance risks under Kuwait’s civil law framework. 

 Practical steps for businesses 

Businesses involved in Kuwait-linked transactions may wish to consider the following: 

• reviewing transaction documentation for MAC/MAE, force majeure, and hardship provisions 
• assessing whether current events make obligations impossible or materially more onerous 
• confirming compliance with notice, mitigation, and procedural requirements 
• ensuring term sheets and LOIs clearly distinguish binding and non-binding provisions, particularly where break fees are contemplated. 

 How we can help 

ASAR’s Kuwait M&A team advises on transaction risk allocation and dispute exposure arising from regional disruption. Our team can assist with: 

• advising on MAC/MAE strategy and drafting 
• assessing force majeure and hardship relief under the Kuwait Civil Code 
• supporting negotiations and transaction restructuring 
• representing clients before Kuwaiti courts or arbitral tribunals where disputes arise 

For further information, please contact Ezekiel Tuma (tag), Managing Partner – etuma@asarlegal.com.