Calculation of Defect Value Clause Samples
The 'Calculation of Defect Value' clause defines the method for determining the monetary worth of any defects identified in goods, services, or works under a contract. Typically, this involves assessing the cost to repair, replace, or otherwise remedy the defect, often referencing market rates or agreed-upon formulas. By establishing a clear process for quantifying defects, this clause ensures both parties have a transparent basis for compensation or deductions, thereby reducing disputes and facilitating fair resolution of quality issues.
Calculation of Defect Value. 11.3.1. If, because of the Title Defect, title to a particular Property or Well fails completely with the effect that Seller has no ownership interest in the relevant Property, the Defect Value shall be the Allocated Value of that Property assigned specifically to it on Exhibit B.
11.3.2. If a Title Defect exists because Seller owns a lesser Net Revenue Interest in a Property and such Property has an Allocated Value assigned specifically to it on Exhibit B, then the Defect Value shall be equal to (a) the Allocated Value minus (b) the product of (i) the Allocated Value times (ii) (A) the Net Revenue Interest owned divided by (B) the Net Revenue Interest assigned on Exhibit B.
11.3.3. If a Title Defect is a lien, encumbrance or other charge upon a Property which is liquidated in amount and such lien, encumbrance or other charge is not securing borrowed funds of Seller, and such Title Defect is not a Minimal Defect, then prior to Closing Seller shall either (a) instruct Buyer to pay at Closing the sum necessary to be paid to the obligee to remove the Title Defect from such Property (the aggregate of all such amounts, the “Liquidated Title Defect Payment”) or (b) retain the obligation of such Title Defect and elect to challenge the validity thereof (or of any portion thereof), in which case Buyer shall extend reasonable cooperation to Seller in such efforts at no risk or expense to Buyer; provided, however, that if such Title Defect is not cured by three days prior to Closing, it shall constitute an Uncured Title Defect. If a Title Defect is a lien, encumbrance or other charge upon a Property which is securing borrowed funds of Seller, then prior to Closing Seller shall obtain a release of any such lien, encumbrance or other charge.
Calculation of Defect Value