✍️ The (almost) perfect coronavirus contract
|Lawtrades||May 7, 2020|
It may be hard to assign blame and praise when assessing who best prepared for the coronavirus. But here’s something we can all agree on: Victoria’s Secret saw the pandemic coming.
Parent company L Brands wanted to jettison Victoria’s Secret: The lingerie brand has been struggling for years because of the decline in brick and mortar traffic and controversies surrounding former company leaders.
L Brands found a buyer in private equity firm Sycamore Partners: And lawyers working for L Brands, who are in the law firm Davis Polk & Wardwell, inserted the most prophetic language you could imagine. They added a “pandemic” as an exception in the material event clause of the contract that would normally allow Sycamore Partners to adjust the terms.
The contract to sell was signed Feb. 20: That was one day after stock market indexes hit record highs and about two weeks before the United States began taking coronavirus seriously. Within a month, L Brands shares fell from $23 to under $10.
Victoria’s Secret didn’t quite win
L Brands ended up pulling out of the deal and will keep control of Victoria’s Secret. The decision came after Sycamore Partners threatened to withdraw. But if L Brands wanted to fight, legal experts say L Brands would’ve prevailed because of the prescient language about pandemics. “I’d say Davis Polk really earned its fee,” University of Delaware law professor Charles Elson told the New York Times.
Just remember the word pandemic next time you write a contract.