The recent judgment in Travelport Ltd & Ors v WEX Inc [2020] EWHC shows how important it is to use precise language when drafting a clause involving a market comparison.

In this judgment, the High Court was asked to analyse a complex “material adverse effect” (“MAE”) clause and, amongst other things, to consider the impact of an event on two parties, “compared to other participants in the industries in which [they] operate“, i.e. a market comparison of the provisions against standard market practice.


WEX Inc is a financial technology service provider which offers corporate payment solutions (“Wex”). Wex had agreed to purchase the parent companies of two business-to-business (“B2B”) payment companies specialising in the travel sector, eNett International (Jersey) Limited (“eNett”) and Optal Limited (“Optal”) from Travelport (“Travelport”), pursuant to a share purchase agreement (“SPA”) for a total of approximately USD1.7 billion.

Completion of the SPA was subject to a number of conditions, including that there had been no “event, change, development, state of facts or effect that would reasonably be expected to have a Material Adverse Effect” (the “MAE Condition”).

The unprecedented disruption to the travel industry as a result of the global COVID-19 pandemic resulted in a decrease in revenue for the eNett and Optal groups. As such, on 4 May 2020, Wex notified Travelport that a MAE Condition had occurred and so Wex was not required to complete the transaction. Travelport disagreed and issued proceedings to seek (i) a declaration that the MAC Condition had not occurred within the meaning of the SPA, and (ii) specific performance of Wex’s obligations under the SPA to complete the transaction.


The definition of MAE was central to the dispute, focusing on two express carve outs in respect of the MAE Condition as set out in the SPA:

  1. an exemption for the effects from causes including specifically “conditions relating from… pandemics”, and
  2. an exception to the pandemic exemption providing that, even if an event otherwise falls within the exemption, a MAE may still exist if its impact had “… a disproportionate effect on [the eNett or Optal groups], taken as a whole, as compared to other participants in the industries in which [eNett], [Optal] or their respective subsidiaries operate”.

The key issue for the Court was the identity of the “industries” in which eNett and Optal operated in for the purpose of assessing the second exception. Wex argued that it was the general payments industry or the B2B payments industry, whereas Travelport contended that it was the narrower travel payments industry.

The Court considered both a textual analysis of the MAE Condition definition and interpretive considerations made in light of its commercial purpose.

A pure textual analysis favoured Wex’s broader interpretation. The SPA referred to “industries” as opposed to “markets”, “sectors” or an identified group of competitors which, in its natural and ordinary meaning, captured participants in a broad sphere of economic activity. That interpretation was also adopted elsewhere in the SPA.

When considering the commercial purpose of the MAE Condition definition, the Court assessed the factual matrix against the objective intentions of the wording to decide whether it extended beyond “firm-specific” risks to eNett and Optal themselves and instead captured risks relating to the broader sector in which they operated. It found that, whilst the transaction related to the acquisition of a travel business, it also extended to a wider payments business. This was based on Wex’s case that it saw future value in extending its reach into other sectors and markets. The commercial purpose did not therefore suggest that the Court needed to depart from an ordinary reading of the language used in the MAE Condition definition.

The Court considered that Travelport failed to establish the existence of a specific travel payments industry. eNett and Optal operated in the more general payments industry and B2B payments industry and so, in invoking the MAE Condition and, by extension the second exception, Wex had to demonstrate that Optal and eNett had been disproportionately affected by COVID-19 when compared to others in those wider industries.


Market comparisons are often used in benchmarking procedures. Benchmarking procedures are favoured by customers in long-term contracts as a way of ensuring that they get “value for money” throughout the term of a contract. The procedure often involves running a mini-competition mid-term to compare the supplier’s performance or pricing with the market (or the benchmark). The purpose of the benchmarking clause is to define the rules of the mini competition, including the consequences for the supplier if its performance lags behind the benchmark.

Benchmarking clauses usually address five separate concepts:

  1. a definition of the services, key performance indicators or pricing to be benchmarked;
  2. safeguards to ensure the process is fair, to prevent it from being gamed by the supplier’s competitors and to protect confidentiality (for example, appointing an independent party to carry out the process);
  3. the benchmark itself, how to arrive at a fair market comparison, the type of data to be sampled and how to align market data to the supplier’s services (so that the benchmark is “like-for-like”);
  4. to define how a deviation from the benchmark will be quantified; and
  5. the consequences and next steps if the supplier’s performance or pricing deviates significantly from the benchmark.

In practice it is often difficult to draft an enforceable clause. Most suppliers are wary of a process which might reduce profitability and sometimes customers’ expectations can be onerous and unfair. As a result, benchmarking clauses are often very complex to negotiate and difficult to operate. It is important to ensure there is a real, principled agreement about what will be compared. At the very least, the parties should try to avoid generic descriptions such as “industries”, “markets”, “sectors” or “competitors”.


This case provides useful guidance on the approach that the Courts will take when interpreting MAE clauses – construing an agreement on its wording, with reference to its commercial purpose, in order to appropriately allocate risk.

It is expected that similar disputes will emerge in the coming months which will provide further clarity. In the meantime, the scope and consequences of MAE clauses should be drafted clearly, and ambiguity and competing meanings avoided. If a market or industry comparator is being used, expressly identify it.

To review the ruling please click here.

For more information, and any guidance or advice on commercial contract clauses, Cleveland & Co External in-house counsel™, your specialist outsourced legal team, are here to help.