Not too long ago, private equity was Mr. Right in corporate match-making. Offering rich premiums and wooing management, private equity firms were often welcome suitors.

Thanks to the credit crunch, however, private equity firms may become known as love 'em and leave 'em rogues. In recent months, private equity buyers have left such companies as Sallie Mae and Harman International Industries at the altar.

And there may be more such break-ups as a result of a recent decision from the influential Delaware Chancery Court.

Last week, Chancellor William B. Chandler III of the court rejected an effort by United Rentals to force Cerberus Capital Management to complete a $4 billion buyout deal.

The judge instead limited Cerberus' liability to the $100 million "reverse break-up fee" to walk away from the deal.

Steven M. Davidoff, an assistant professor at Wayne State Law School, who has blogged obsessively about United Rentals, says the case reflects a changed world in private equity, where sellers cannot count on a buyer closing a deal to avoid the "reputational hit" of walking away.

"A reverse termination fee creates not a deal, but an option to buy," he says.

"I am still shocked that in this environment parties are negotiating options with private-equity firms," he adds, citing Waste Industries USA's Dec. 18 deal to be taken private by an investor group that includes Goldman Sachs for about $544 million. "If you agree to a reverse termination fee, you should be prepared for the buyer to walk, and don't be surprised."

In the future, merger and acquisition lawyers say, Chandler's opinion will place new pressures on corporate directors.

Until now, directors have faced scrutiny primarily over whether they got the best price in private equity deals, notes Theodore N. Mirvis, a partner at Wachtell, Lipton, Rosen & Katz in New York. "Some of the heat ought to turn where it ought to be," he says. "This will cause there to be more scrutiny on the question, 'Did you get certainty, and did you understand the certainty you had?'"

The question is more important than ever, given the climate and the fact that there's no guarantee anymore that a deal will close: "I don't know that there is any reputational risk any longer for a private-equity sponsor walking away from a deal," he said. "A director ought to say to his lawyers: What options does the buyer have?"

Indeed the trial over the agreement between Cerberus and United Rentals, the largest equipment rental company in the world, turned on the slippery nature of the communications between the two sides, which produced what Chandler's opinion calls a "hopelessly conflicted contract."

The merger agreement contained a clause entitled "specific performance."

Yet, even United Rentals' lawyer, Eric Swedenburg, of Simpson Thacher & Bartlett, testified, "I don't ever recollect those words being used" during the lengthy negotiations.

Late in the negotiation of the deal this summer, Cerberus added language to the clause on the break-up fee stating that "in no event shall the company seek equitable relief" (or specific performance) and added what Chandler calls the "infamous" language to the "specific performance" section, noting it was subject to the "in no event clause." Taking his pen to this version, Swedenburg initially struck the language about not getting equitable relief, but he did not stick by this revision.

At the trial, Chandler said he would resolve the hopeless conflict in the contract by applying the "forthright negotiator" principle, and found both sides lacking: "The evidence presented at trial conveyed a deeply flawed negotiation in which both sides failed to clearly and consistently communicate their client's positions," the chancellor wrote. "Even if the company believed the agreement preserved a right of specific performance, its attorney, Eric Swedenburg, categorically failed to communicate that understanding during the latter part of the negotiations."

Simpson Thacher asserted attorney-client privilege, refusing to testify over what it told the United Rentals board about the impact of Cerberus' "subject to" clause.

"We will never know what really happened," says Professor Davidoff.

Larry E. Ribstein, a visiting professor at New York University School of Law, predicted on his blog that Chandler's opinion "gives the parties incentive to clearly communicate their intentions." In an interview, Ribstein said, "Chandler thought that United Rentals was not being forthright because they knew what Cerberus' actual position was, and didn't do anything to set them straight."

But Jeffrey Lipshaw, a professor at Suffolk University Law School in Boston, who spent time in private practice doing deals and as an in-house corporate lawyer, takes issue with Ribstein. He calls himself "much less judgmental" about the lawyers. 'I am just very sympathetic to the give and take of the negotiation," he says, "making a deal with language is an art, not a science...Sometimes you want the smallest possible editing just to get the thing moving forward."

And, it seems, Chandler agrees: "The law of contracts, however, does not require parties to chose optimally clear language; in fact, parties often riddle their agreements with a certain amount of ambiguity in order to reach a compromise." And when the contract is 'right on the line" in Lipshaw's words, you will end up in court, fighting over who was most "forthright over the wiggle room.

Private-equity firms, meanwhile, seem to be saying: Reputation? What reputation? Here's a $100 million and watch me walk away.

Karen Donovan