Defect Amounts Clause Samples
The 'Defect Amounts' clause defines how financial values are assigned to defects or non-conformities identified in goods, services, or contractual deliverables. Typically, this clause outlines the method for calculating the monetary impact of a defect, such as referencing repair costs, replacement values, or agreed-upon penalties. By specifying these amounts, the clause provides a clear mechanism for compensating the non-breaching party and helps allocate risk by quantifying the consequences of defects, thereby reducing disputes over damages.
Defect Amounts. The diminution of value of the Assets attributable to any Defect (the “Defect Amount”) shall be determined as follows:
(i) if Purchaser and Sellers agree on the Defect Amount, that amount shall be the Defect Amount;
(ii) if a Title Defect is a Lien which is liquidated in amount, then the Defect Amount shall be the amount necessary to be paid to remove the Title Defect from Sellers’ interest in the affected Assets;
(iii) if a Title Defect represents a negative discrepancy between (A) the actual Net Revenue Interest for any Well and (B) the “Net Revenue Interest” percentage stated on Exhibit A-2, Part 1 for such Well, then the Defect Amount shall be equal to (1) the product of the Allocated Value of such Well multiplied by (2) a fraction, the numerator of which is (x) the remainder of (i) the “Revenue Interest” percentage stated on Exhibit A-2, Part 1 for such Well minus (ii) the actual Net Revenue Interest of such Well, and the denominator of which is (y) the “Net Revenue Interest” percentage stated on Exhibit A-2, Part 1 for such Well; provided that if the Title Defect does not affect the “ Revenue Interest” percentage stated on Exhibit A-2, Part 1 for such Well throughout its entire productive life, the Defect Amount determined under this Section 3.2(c)(iii) shall be reduced to take into account the applicable time period only;
(iv) if the Title Defect represents an obligation, encumbrance, burden or charge upon or other defect in title to the affected Oil and Gas Property of a type not described in Section 3.2(c)(i), (ii) or (iii) above, the Defect Amount shall be determined by taking into account the Allocated Value of the Oil and Gas Property so affected, the portion of Sellers’ interest in the Oil and Gas Property affected by the Title Defect, the legal effect of the Title Defect, the potential economic effect of the Title Defect over the life of the affected Oil and Gas Property, the values placed upon the Title Defect by Purchaser and Seller and such other factors as are necessary to make a proper evaluation and determination of such value;
(v) if a Title Defect as to a particular tract or parcel of any Lease (or portion thereof) included in any Undeveloped Acreage represents Sellers holding Defensible Title to a number of Net Revenue Interest Acres as to the tract(s) or parcel(s) constituting Undeveloped Acreage that is less than the number set forth in the “Net Revenue Interest Acres” column of Exhibit A-2, Part 2 for such tract(s) or parcel(s), t...
Defect Amounts. The aggregate sum of all Defect Amounts that Purchaser has asserted, reasonably and in good faith, pursuant to Section 6.4(a) prior to the Claim Date, net of all Title Benefit Amounts asserted by Seller, reasonably and in good faith, pursuant to Section 6.4(b) prior to the Claim Date, shall not exceed 25% of the Unadjusted Purchase Price.
Defect Amounts. The diminution of value of the Assets attributable to any valid Defect that burdens an Asset (the “Defect Amount”) shall be determined as follows:
(i) if Purchaser and Sellers agree on the Defect Amount, that amount shall be the Defect Amount;
(ii) subject to Section 3.2(d)(vii), if a Title Defect is a Lien that is liquidated in amount, then the Defect Amount shall be the amount necessary to be paid to remove the Title Defect from the Subject Company Group’s interest in the affected DSU or Well;
(iii) if a Title Defect as to the applicable Subject Formation affecting any Well or DSU represents a negative discrepancy between (A) the actual Net Revenue Interest for the applicable Subject Formation as to such Well or DSU and (B) the Net Revenue Interest percentage stated on the applicable Annex to Exhibit A-2 for such Subject Company Group with respect to such Subject Formation for such Well or the applicable Annex to Exhibit A-3 for such Subject Company Group with respect to such Subject Formation for such DSU, as applicable, over the productive life of such Well or DSU, and in such case there is a proportionate decrease in the actual Working Interest with respect to the applicable Subject Formation as to such Well or DSU, as applicable, from the Working Interest stated on the applicable Annex to Exhibit A-2 for such Subject Company Group with respect to such Subject Formation for such Well or the applicable Annex to Exhibit A-3 for such Subject Company Group with respect to such Subject Formation for such DSU, as applicable, then the Defect Amount shall be equal to the product of (1) the Allocated Value of such Subject Formation as to such Well or DSU, as applicable multiplied by (2) a fraction, the numerator of which is (x) the remainder of (I) the “Net Revenue Interest” percentage stated on the applicable Annex to Exhibit A-2 for such Subject Company Group with respect to such Subject Formation for such Well or the applicable Annex to Exhibit A-3 for such Subject Company Group with respect to such Subject Formation for such DSU, as applicable, minus (II) the actual Net Revenue Interest for such Subject Company Group with respect to such Subject Formation as to such Well or DSU, as applicable, and the denominator of which is (y) the “Net Revenue Interest” percentage stated on the applicable Annex to Exhibit A-2 for such Subject Company Group with respect to such Subject Formation for such Well or the applicable Annex to Exhibit A-3 for such Subject Company...
Defect Amounts. The sum of (i) all Title Defect Amounts for uncured Title Defects properly reported under Section 4.2, less the sum of all Title Benefit Amounts for Title Benefits properly reported under Section 4.2, (ii) all Environmental Defect Amounts for uncured Environmental Defects properly reported under Section 4.3, and (iii) the amount of all casualty or condemnation losses pursuant to Section 13.2 shall be less than 20% of the unadjusted Purchase Price (adjusted for any Preference Rights Assets, in an amount equal to the Allocated Value of such Preference Rights Assets less any purchase price adjustments agreed to between Seller and Third Party with respect to the sale of such Preference Rights Assets, excluded from this transaction pursuant to Section 13.3(c)).