Any case where imposibility defense due to economy succeeded

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Looking_Legal
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Any case where imposibility defense due to economy succeeded

Postby Looking_Legal » Fri Apr 09, 2010 9:32 pm

I'm looking for a case in which the impossibility defense as it relates to the current economy was used successfully. Specifically, is there a case in which a debtor was able to use that defense to defend a lawsuit by a creditor, a bank, by arguing that the repayment of the debt was rendered impossible by the collapse of the national economy?

The creditor and debtor agreed, prior to the market collapse in january, 2008, at the inception of the credit facility, that the marketable collateral had a certain value, and the loan was based on that value. Subsequently, and due to the economic collapse, the value of the collateral, which was to be the source of repayment, was diminished to the point where it was no longer sufficient to repay the debt.

If anyone knows of such a case, I would appreciate a pointer to it. Other thoughts or comments are also welcome as there must be many such cases now working their wah through the courts.

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Jones, Dow
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Re: Any case where imposibility defense due to economy succeeded

Postby Jones, Dow » Fri Apr 09, 2010 9:40 pm

Westlaw, FTW!!

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lostmymojo
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Re: Any case where imposibility defense due to economy succeeded

Postby lostmymojo » Fri Apr 09, 2010 10:01 pm

There is not a chance in hell your going to get an impracticably defense through on those facts. But you already knew that.
Last edited by lostmymojo on Fri Apr 09, 2010 10:37 pm, edited 1 time in total.

blsingindisguise
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Re: Any case where imposibility defense due to economy succeeded

Postby blsingindisguise » Fri Apr 09, 2010 10:20 pm

"I spent all the money, therefore it is impossible for me to pay you back. I PLEAD IMPOSSIBILITY."

Renzo
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Re: Any case where imposibility defense due to economy succeeded

Postby Renzo » Sat Apr 10, 2010 2:54 am

lostmymojo wrote:There is not a chance in hell your going to get an impracticably defense through on those facts. But you already knew that.

Plus, every mortgage/secured credit agreement in the world has a clause that allows the lender to recoup over the value of collateral.

You need to work a fraud in the inducement angle.

solidsnake
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Re: Any case where imposibility defense due to economy succeeded

Postby solidsnake » Mon Apr 12, 2010 1:49 am

Donald Trump is using this defense right now; who knows if it will work. The consolidated action was recently transferred from Queens county back to NY county. Trump v. Deutsche Bank Trust Co. Ams., 65 A.D.3d 1329, 1331 (N.Y. App. Div. 2009). The pincite mentions the economic recession/force-majeure defense that was getting press when first filed. See http://www.nytimes.com/2008/12/05/busin ... gewanted=2.

Since the recession is less than 3 years old, I don't think you are going to get a lot of relevant appellate-level rulings just yet.

blsingindisguise
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Re: Any case where imposibility defense due to economy succeeded

Postby blsingindisguise » Mon Apr 12, 2010 12:14 pm

The trump thing is NOT an impossibility defense - he's trying to argue that the recession comes under the force majeure clause of his contract.

solidsnake
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Re: Any case where imposibility defense due to economy succeeded

Postby solidsnake » Mon Apr 12, 2010 1:19 pm

blsingindisguise wrote:The trump thing is NOT an impossibility defense - he's trying to argue that the recession comes under the force majeure clause of his contract.


Force Majeure provisions are written into Ks to allocate risk in case of an unforeseen event after the time of contracting that would make performance IMPOSSIBLE or commercially impracticable.

Your argument is like saying "X is not raising self-defense -- he's trying to argue that he had to defend himself to stop the killer from murdering him."

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Kohinoor
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Re: Any case where imposibility defense due to economy succeeded

Postby Kohinoor » Mon Apr 12, 2010 1:25 pm

The national economy collapsed?

solidsnake
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Re: Any case where imposibility defense due to economy succeeded

Postby solidsnake » Mon Apr 12, 2010 1:36 pm

Haha...according to Trump. I actually think a court might theoretically buy the defense since this recession was more global than regional -- especially if they can convince the court that the lender knew it was over-leveraged and had reasonable foresight (again another HUGE stretch, but a theory), but ultimately it won't work for Trump since he's such a bad test case; the guy's corporations have filed for chap.11 three times, and a court may see this defense as being raised in bad faith.

blsingindisguise
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Re: Any case where imposibility defense due to economy succeeded

Postby blsingindisguise » Mon Apr 12, 2010 5:49 pm

solidsnake wrote:
blsingindisguise wrote:The trump thing is NOT an impossibility defense - he's trying to argue that the recession comes under the force majeure clause of his contract.


Force Majeure provisions are written into Ks to allocate risk in case of an unforeseen event after the time of contracting that would make performance IMPOSSIBLE or commercially impracticable.

Your argument is like saying "X is not raising self-defense -- he's trying to argue that he had to defend himself to stop the killer from murdering him."


Incorrect.

While there is substantial overlap between the circumstances that may be covered by a force majeure clause and a general impossibility defense, they are not the same thing. A force majeure clause is tailored by the parties to contemplate and account for specific kinds of risks. Such a clause could easily cover circumstances that would not fly in a standard impossibility defense. E.g. say I'm leasing commercial property near a beachfront, and as I'm about to begin the lease, a hurricane (in an area that has not typically suffered such severe hurricane damage) rips up the beachfront but does not affect the property I'm leasing. Tourism is way down and my business is likely to fail. A force majeure clause could have been constructed to account for this kind of situation. An impossibility defense, however, would never fly.




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