A hell or flood contract is a legal contract with a clause that states that the buyer must continue to make payments regardless of complications. The term for the sentence comes from a colloquial expression that means to accomplish a task regardless of difficulties (“come hell or flood”). It is also known as a promise of payment. A hell or flood contract (also known as a promise of payment contract) is an non-cancellable contract in which the buyer must make the specified payments to the seller, regardless of any difficulty. Hell or flood clauses bind the buyer or tenant under the terms of the contract until the end of the contract. There are a number of clauses that can be used in a contract to try to limit the excuses a party has for breaching the contract. Popular clauses in addition to the hell or flood clause are as follows: hell or flood contracts require payment, whether the good or service works as intended or not. In general, hell or flood contracts are used when the provider of a service or product takes a large risk on behalf of the customer. The risk may be in terms of committed capital or even in adjusting a product in such a way that there is unlikely to be another buyer in the market. The clause refers to a party`s obligation to enter into a claim under the Contract without contractual defence.

The buyer is required to pay for a product, such as electricity from a power plant or a service such as the transportation of gas or oil, even if the buyer does not accept the product or use the service. Hell or flood contracts can come into play in project finance transactions, acquisition transactions and high-yield debt securities. For example, a takeover transaction in hell or on the high seas may require the potential buyer in the agreement to bear the burden of managing divestitures or necessary litigation that may arise from antitrust regulatory issues. The viability of the acquisition agreement could be directly related to the buyer`s ability to resolve these issues and chart a course for the company. As the lawyer involved in negotiating mergers, acquisitions or other transactions knows, provisions that allocate antitrust risk between buyer and seller or between joint venture partners (JVs) are a common feature of merger and joint venture agreements. Such regulations are becoming increasingly important in today`s aggressive antitrust environment around the world. They can be very different in detail and substance. For transactions that present little or no antitrust risk, these provisions may only require the parties to cooperate to obtain approval from the relevant antitrust authorities, or they may transfer all risk to the buyer, who perceives such a provision as not a great “gift” if there is no real antitrust risk. For transactions that present a higher antitrust risk, the agreement may specify the obligations of each party and take into account many contingencies.

Often, the agreement will spread the antitrust risk unevenly between the parties. In more and more cases, the buyer or a joint venture partner assumes most or all of the risk by committing to do “to the best of its ability”, to pay significant separation fees if approval is not obtained within a reasonable period of time, or even to take all necessary steps to obtain antitrust approval, up to and including litigation. assignments or remedies requested by executors. There are cases where the lessor is not directly involved in the property in the agreement. Often, the lessor buys the property requested by the tenant and then transfers the property to the tenant after signing the hell or flood contract. In such scenarios, the tenant, and not the lessor, bears all defects that could affect the device after handover. There are concerns about manufacturing defects between the manufacturer and the tenant. The tenant in such an agreement usually chooses the equipment he wishes to procure. The owner then buys the selected item, which in turn is rented to the customer. A financing agreement with hellish or deep-sea language aims to ensure that the tenant pays the lessor under unambiguous conditions. In the financial sector, debt hell or flood contracts, high-yield bonds, takeovers and venture capital transactions are common. Hell or flood contracts in trade-in contracts require buyers to make uninterrupted payments.

Buyers must also take responsibility for any future litigation that may arise from antitrust regulations relating to ownership/equipment. Hell or flood clauses are usually part of contracts in the construction and equipment rental industry. Some equipment suppliers insist on the clause in order to be able to deliver continuously. The clause is also popular with equipment suppliers such as computers and industrial equipment. Light or flood clauses are protected by the Uniform Commercial Code (CDU). In particular, Article 2(A) of the Code grants special protection to the term. With a few exceptions, U.S. courts in most states apply the hell or flood clause in contracts. Courts have ruled in the past that the clause is valid in various legal disputes. There are provisions to impose hell or flood contracts despite defects in the rented property/equipment. Device errors are not a valid reason for not paying installments.

Sometimes the selling party only deals with the financial aspect of the deal and is not involved in the beneficial ownership (i.e. the finance company) at all. The clause defines the consent of issuers to bear a certain amount of debt of external parties in a general debt basket in accordance with the agreement. The general basket of debt or the basket of hell or flood offers flexibility to borrowers. A hell or flood clause in a contract is a provision that states that a buyer must pay the agreed payments at that time regardless of a meeting. Read 3 min Hell or flood clauses are used in financial transactions in the following context: It should be borne in mind that including such hell or flood sections in contracts can be difficult and intimidating, causing potential buyers to avoid the transaction. In its most recent decision, the court rejected Akorn`s argument and concluded that Fresenius` termination of the merger agreement was valid. The court`s discussion of water supply from hell or flood focused on Fresenius` settlement negotiations with the FTC. According to the court, Fresenius considered offering the FTC one of two divestiture programs. Option 1, which sold various ANDAs, would likely have completed the merger in April 2018. Option 2, which included the sale of a manufacturing plant, would have required the parties to postpone the closing for a few more months, until June or July.

Fresenius` decision to pursue “parallel strategies,” the court concluded, “was a reasonable approach that fell within” Fresenius` exclusive right to “control the strategy” in order to gain FTC approval. Although the court acknowledged that Fresenius “technically violated the Hell or Flood Pact” by temporarily pursuing Option 2, it ultimately concluded that the violation was not “material.” After only a brief discussion of Option 2, Fresenius “quickly” abandoned it in favor of Option 1 and kept the merger on track to be finalized in April 2018. The court ruled that Fresenius had therefore not lost its right of termination, which it had properly exercised in light of Akorn`s shortcomings in terms of FDA, data integrity and quality. In April 2017, German healthcare company Fresenius Kabi AG agreed to acquire generic company Akorn for US$4.3 billion. The merger agreement contained a hell or flood provision requiring Fresenius to “take all necessary steps” to obtain approval from antitrust authorities and refrain from “any action” that could “impede or delay” closing. The merger agreement gave Fresenius the exclusive right to “control the strategy” in order to obtain approval from the antitrust audit authority, in this case the Federal Trade Commission (FTC). Shortly after signing, but before closing, Akorn`s business performance reportedly suffered a dramatic slowdown. Fresenius also learned that in an alleged violation of the merger agreement, Akorn appeared to have distorted compliance with FDA regulations and failed to address material quality and data integrity issues. In April 2018, Fresenius Akorn announced that it was terminating the merger agreement before it closes and while FTC approval is pending.

Akorn filed a lawsuit seeking a certain advantage. The term “hell or flood clause” comes from the phrase “come hell or flood,” which means that an action must be performed regardless of what happens. The term seems to have its origins in the Ranches of the Midwest in the late 19th century, where determined cowboys drove their herds of cattle through floods and “hell.” Companies may insist on having a hell or flood clause in their contracts for a number of reasons: Although antitrust risk transfer provisions are a common aspect of most major acquisitions or other transactions, there is a lack of competence to interpret these provisions and, in particular, which constitutes a violation of these provisions. . . . .