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  • 05-07-2013

By way of a bankruptcy clause, parties purport to regulate the consequences of a party's bankruptcy.

Typically, such a clause provides for termination of the contract in case of a party's bankruptcy. Some clauses go beyond that – for example, by adding that the bankrupt party must forfeit certain rights or pay penalties. In its recent Megapool decison(1) the Supreme Court suggested two possible grounds for challenging a bankruptcy clause by which the bankrupt party forfeits certain rights: violation of law, and violation of the principles of reasonableness and fairness. The first ground is new and makes it easier to challenge forfeiture-on-bankruptcy clauses.

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