Ipso facto clause: Difference between revisions
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===USA: [[Ipso facto clause]]s and the [[Bankruptcy Code]]=== | ===USA: [[Ipso facto clause]]s and the [[Bankruptcy Code]]=== | ||
In | In America, an [[ipso facto clause]] is one that allows one party [[terminate]] a contract, [[accelerate]] payments under it, or somehow get an unconscionable jump on the other party, if that unfortunate other party goes [[bankrupt]]. These are generally invalid under the [[Bankruptcy Code]] because an insolvency trustee is not bound by any provision that is conditioned on the debtor's insolvency. | ||
11 USC §365(e)(i) states: | 11 USC §365(e)(i) states: | ||
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===UK: the [[anti-deprivation]] principle=== | ===UK: the [[anti-deprivation]] principle=== | ||
In the United Kingdom, there is no ''statutory'' equivalent of the [[ipso facto rule]], those clever judges of the [[common law]] invented<ref>I mean, “uncovered an until-then-disregarded but nonetheless foundational [[Doctrine of precedent|principle of the common law]] that extends, unspoken, back to the dawn of civilisation”.</ref> the [[anti‑deprivation rule]]: that, in the honeyed words of Sir William Page Wood V.C., in {{citer|Whitmore|Mason|1861|2J&H|204}} “no person possessed of property can reserve that property to himself until he shall become [[bankrupt]], and then provide that, [[in the event of]] his becoming bankrupt, it shall pass to another and not his creditors”. This required some wilfulness and not just inadvertence or lucky hap, but if you ''intend'' to defeat the standing bankruptcy laws you will not get away with it. | In the United Kingdom, there is no ''statutory'' equivalent of the [[ipso facto rule]], those clever judges of the [[common law]] invented<ref>I mean, “uncovered an until-then-disregarded-but-nonetheless-foundational [[Doctrine of precedent|principle of the common law]] that extends, unspoken, back to the dawn of civilisation”.</ref> the [[anti‑deprivation rule]]: that, in the honeyed words of Sir William Page Wood V.C., in {{citer|Whitmore|Mason|1861|2J&H|204}} “no person possessed of property can reserve that property to himself until he shall become [[bankrupt]], and then provide that, [[in the event of]] his becoming bankrupt, it shall pass to another and not his creditors”. This required some wilfulness and not just inadvertence or lucky hap, but if you ''intend'' to defeat the standing bankruptcy laws you will not get away with it. This feels quite a long way away from exercising a Bankruptcy Event of Default under a master trading agreement, and so it has generally been regarded, until the [[coronavirus|global pandemic]] prompted some hasty and ill-thought out legislative proposals in the spring of 2020. | ||
It seems, at any rate, that Section 2(a)(iii), which allows a party a positive windfall benefit in the event of an insolvency (in that it can suspend its own performance, but insist on performance from its counterparty) might resemble some kind of intended deprivation; merely crystallising ones existing position and stopping it getting further down the Swanee, as one might to be closing out your {{isdama}} altogether, seems less so, | |||
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