Yatra Online v. Ebix: clarify post-termination rights to ensure hook for breach of contract claim

Quarterly Corporate / M&A Decisions update series

The court’s decision in Yatra Online, Inc. v. Ebix, Inc. et al (C.A. No. 2020-0444-JRS (Del. Ch. May 13, 2021)) underscores the importance of carefully considering the language of a contract’s termination provisions when negotiating and terminating a merger agreement. In Yatra Online, the plaintiff terminated the merger agreement and sued the defendant for breach of contract and other claims. The court ruled that the defendant was not liable post-termination because the plain language of the agreement stated that “[i]n the event of termination ... there shall be no liability on the part of any party.” The court’s decision reminds merger parties to consider what remedies are available in the event of a breach and how the plain language of agreements, including termination clauses, impacts the availability of those remedies.

In February 2019, Ebix, Inc. approached Yatra regarding a potential merger. In July 2019, Yatra and Ebix finalized the merger agreement. Ebix agreed to create a subsidiary, EbixCash Travels, Inc., that would merge with Yatra, leaving Yatra as the surviving entity and a direct, wholly owned subsidiary of Ebix. As consideration, each Yatra stock would be converted into the right to receive shares of Ebix convertible preferred stock. This right included a put right requiring Ebix to redeem any unconverted shares of convertible preferred stock at a set price.

When the merger agreement was executed, the convertible preferred stock did not exist yet. In the merger agreement, Ebix agreed to use “reasonable best efforts” to file and gain SEC approval of a Form S-4 registration statement. The Form S-4 registration statement, and other closing conditions, had to be completed by April 2020; otherwise, the merger agreement would terminate automatically.

Ebix fell behind in satisfying the closing conditions, and requested that the merger agreement be renegotiated. Ebix and Yatra negotiated several extension agreements, with the final agreement setting a completion date for June 2020. As the COVID-19 pandemic progressed, Ebix’s share value fell, inflating the put right’s value relative to Ebix’s market capitalization. Even as Ebix repeatedly extended its merger deadline with Yatra, Ebix simultaneously negotiated an agreement with its lenders that allegedly would prohibit Ebix from issuing the merger agreement’s put right.

When Ebix missed its closing deadline yet again, Yatra terminated the merger agreement and filed suit. Yatra’s final complaint alleged the following counts against Ebix: (1) breach of the merger agreement; (2) breach of the extension agreement; (3) breach of the covenant of good faith and fair dealing; and (4) fraud. Additionally, Yatra alleged one count of tortious interference with contract against Ebix’s lenders.

The Delaware Court of Chancery dismissed all counts. The court’s decision focused primarily on Yatra’s choice to terminate the merger agreement.

First, the plain text of the merger agreement stated that “[i]n the event of any termination of this [merger agreement] . . ., the obligations of the parties shall terminate and there shall be no liability on the part of any party with respect thereto,” with just a handful of narrow exceptions. The court found that Yatra’s interpretation of the language “stretche[d] the words beyond their tolerance” and was not reasonable enough to suggest that the provision was ambiguous. The court also rejected Yatra’s argument that Ebix’s suggested interpretation conflicted with other portions of the merger agreement. as well as Yatra’s argument that it was “absurd” to suggest that the merger agreement could force Yatra to sue for breach of the merger agreement without first terminating the merger agreement. The court noted that a binary choice between terminating and suing for damages or specific performance makes perfect sense, with parties who are concerned that they themselves may have liability choosing to terminate while parties who believe they have clean hands opting to sue. Ultimately, the court enforced the plain language of the merger agreement and concluded that Yatra could not enforce Ebix’s various warranties in the merger agreement, including prompt filing of the S-4 related to the put right, post-termination.

Second, the court found that the claim for breach of the extension agreement necessarily failed with the claim under the merger agreement. “[A]s its name suggests,” the extension agreement was not a standalone agreement, but an extension of the merger agreement. The parties’ rights and obligations under the merger agreement otherwise remained the same. Thus, Yatra’s decision to terminate the merger agreement also extinguished any claims it may have had under the extension agreement.

Third, Yatra’s claim for breach of the implied covenant of good faith and fair dealing also failed because the alleged conduct was addressed squarely by the merger agreement, leaving no contractual gap for the implied covenant to fill.

Fourth, Yatra’s claim of fraud failed because Yatra failed to plead causation. Yatra alleged that but for Ebix’s false promises that it was engaged in meaningful negotiations, Yatra would have sued for specific performance of the merger agreement – in particular, the issuance of the put right. However, specific performance of the merger agreement was never a possibility because the SEC had not declared the S-4 effective. Thus, Yatra did not have a right to specific performance, and therefore suffered no injury as a result of its reliance on Ebix’s supposed false representations.

Finally, Yatra’s claim for tortious interference with contract by the lender defendants was dismissed for failure to allege an injury caused by the tortious interference. Yatra stated that the lenders had caused the loss of the put right. But again, Yatra failed to plead causation – the court noted that even without the lender agreement’s execution, Yatra would not have been able to pursue the put right because the S-4 had not been declared effective.

Yatra’s breach of contract claims may have survived post-termination had the parties included a provision carving out liability beyond just pre-termination fraud. Yatra reminds parties to keep post-termination scenarios and rights in mind, both while drafting a merger agreement and while considering termination of a merger agreement.


Authored by Ryan M. Philp, Allison M. Wuertz, and Shannon Zhang.

David Michaeli
New York
Allison Wuertz
New York
Jon Talotta
Global Co-Lead
Northern Virginia
William Regan
New York


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