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Watch What You Say!

By Lee J. Potter, Jr.
October 21, 2010
The Deal

Watch What You Say!

By Lee J. Potter, Jr.
October 21, 2010
The Deal

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Corporate law partner Lee J. Potter, Jr. analyzes for The Deal a case that resulted in a $281 million damages award against Turner Broadcasting System for breach of oral contract.

Parties negotiating an M&A transaction usually assume that, unless and until they sign a definitive acquisition agreement, either side is free to walk away. Negotiators will often sign a letter of intent, or LOI, stating they are only discussing a possible transaction and are not obliged to try to close the deal until they sign a formal transaction agreement. However, a recent Georgia Court of Appeals case demonstrates how easily such an assumption can be upended. In Turner Broadcasting System Inc. v. McDavid, damages were awarded against TBS for breach of an alleged oral contract formed during negotiations. The jury reached this decision even though no definitive agreement was signed and the parties had signed an LOI stating neither would be bound until they had signed a definitive agreement.

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