Misunderstanding Regarding Dates Does Not Provide Grounds to Reform Earn-Out Provision in Purchase Agreement, Rules Chancery Court
By Scott E. Waxman and H. Corinne Smith
In Glidepath Limited v. Beumer Corporation, the Delaware Court of Chancery ruled against the sellers of a limited liability company, holding that the purchase agreement should not be reformed to correct the dates comprising the earn-out period for the transaction. The Court reasoned that while the seller was in fact mistaken about the terms of the agreement, there was neither a mutual mistake nor a unilateral mistake with knowing silence; additionally, the Court was unable to reform the contract because the parties did not come to a specific prior understanding that differed from the written agreement.