Meaning
Evident mistakes on the face of accounting records or contract documents permit immediate correction without full litigation. A finding of manifest error allows post-closing adjustments to cap tables, purchase price allocations or executive earnout calculations when mathematical or clerical blunders occur. The standard governs transaction adjustments by bypassing standard arbitration delays for obvious administrative oversights.
It stops applying when disputes involve subjective interpretation or disputed valuation methodologies.
Correction Standard
Written records must demonstrate obvious mathematical errors or misquoted figures without requiring external evidence. Establishing a manifest error requires clear proof of clerical oversights such as inverted digits or incorrect compounding formulas. Contracting parties correct certified figures immediately upon verification of the mistake.
Dispute Scope
Valuation disagreements involving complex economic judgment fall outside simple administrative correction. Raising a claim of manifest error fails when the disputed figure results from deliberate accounting policy choices rather than calculation mistakes. Former executives spent hours disputing earnout calculations when definitions lack explicit accounting rules.
Resolution Boundary
Formal arbitration or judicial proceedings resolve substantive operational disputes that fail the clerical threshold. Beyond a proven manifest error, parties must pursue standard legal remedies to alter signed settlement agreements. Clean contractual handovers depend on precise definitions of obvious correction triggers.
