North Carolina Business Litigation Report

Avesair, Inc. v. Inphonic, Inc., 2007 NCBC 32 (N.C. Super. Oct. 16, 2007)(Tennille)

The Court interpreted an earnout provision in an asset purchase agreement, which called for the application of Delaware law. The Court granted relief to the plaintiff, which resulted in an award to the plaintiff of nearly $4 million in stock based upon defendant's failure to comply with its contractual obligation to provide "outside financial information" regarding its post-purchase performance. This was more than the defendant would have had to pay if the earnout target had been met, and it appeared both parties agreed that it had not been met.

The Court discussed the defendant's argument that this was both an unenforceable penalty and a windfall, but concluded that "the fundamental maxim [of contract construction is] that the parties are bound by the terms of their own agreement."

Full Opinion

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Mack Sperling
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