1. Why do you think Digion wants to buy Immersive?
First, the purchase of Immersive provides Digion with opportunities of business growth. Digion seeks to make online game development more efficient for developers. Immersive’s popularity among game developers can assist with that goal. Digion can also take advantage of Immersive’s two cofounders’s years of experience in game server hosting.
Secondly, the purchase of Immersive aligns with Digion’s global strategy. It seems that Digion is trying to establish a global presence as shown by its expansion across Canada., the US and the UK. Immersive is Frankfurt-based.
2. How would you advise Elena handle the situation with Tristan?
Elena could not refer to Clause 7.3 because of two reasons. First, according to Clause 1.2, Clause 7.3 is not intended to be legally binding on the Parties. Secondly, ‘the Business’ in Clause 7.3 refers only to the business of Immersive, not extending to Digion.
In that situation, Elena needs to specifically include restrictive covenants restraint of trade clauses such as non-compete clauses, non-solicitation clauses, no poaching and recruitment clauses and confidentiality clauses.
3. What is the purpose of Clause 5 in Document 3?
Clause 5 sets out conditions precedent to completion. A condition precedent in a SPA is used to safeguard the position and minimize the risk of at least one party (usually the purchaser but sometimes also the seller). It provides the relevant party with the possibility to “unwind” the transaction and escape the performance thereof in case one or more events have not occurred or conditions have not been met.
4. In Clause 7, note the phrase, 'The Seller’s liability under the warranties and indemnities shall be subject to limitations.' Suppose you were the lawyers acting for the Seller, what could you do to limit the Seller's liabilities? Why is this important?
I would include the following limitation of liability clause when drafting:
Claim threshold. The seller’s liability is often capped either at a specified sum or by reference to a percentage of the purchase price.
Double recovery. The purchaser’s ability to recover twice in relation to the same event is typically excluded from the indemnity.
Time limitations. The purchaser is often required to notify the seller of the occurrence of an event giving rise to liability (or potential liability) under the indemnity provision within a certain period of the purchaser becoming aware of that event.
Change in law. Particularly in the context of tax covenants, it is common practice for liability arising as a result of a change in law or tax rates to be excluded from the indemnity.
In the absence of a limitation of liability, a party is liable and responsible for all of the reasonably foreseeable damages that it causes the other party. That includes any damages that a reasonable third-party would expect (generally known as direct damages) and all of the damages that the parties’ themselves would reasonably contemplate or expect given their knowledge of the deal (indirect damages). Given the potential risks, parties routinely try to limit their liability with liability caps and disclaimers. Limitation of liability clauses are an important contractual tool designed to manage overall risk by limiting a party’s potential liability for damages.
5. Why could it be important to Digion that 'the courts of England have exclusive jurisdiction to settle any dispute'?
This is because the SPA is made between parties based in different states or countries. Digion is headquartered in London while Immersive is Frankfurt-based. The exclusive jurisdiction clause provides practical benefit for Digion such as the increased certainty with respect to the legal rules apply to any dispute, lowered cost of an action, convenience with respect to the location of the court and the location of any witnesses and evidence. The provision saves the parties further disputes over which court to take their issues to, potentially reducing delay and expense of litigation.