Conditional claims and ipso facto clauses in bankruptcy
DOI:
https://doi.org/10.33344/vol13iss1pp34-55Keywords:
bankruptcy law, conditional claim, ipso facto clause, scope of application, KKO 2016:100, contractual penaltyAbstract
According to the Finnish Bankruptcy Act (120/2004, as amended) Chapter 1, Section 5, conditional claims are generally considered as acceptable claims in bankruptcy. However, these claims may sometimes contradict with primary bankruptcy law principles, if they seem to be only applicable in bankruptcy. In these situations, conditional claims can be considered to be caused by so called ipso facto clauses, meaning contracts (or single terms) that have the sole purpose of affecting the rights of debtors in case of a bankruptcy. Courts and legal scholars have consistently found such agreements unenforceable but the detailed functioning of the doctrine has long been quite unclear.
In response, this article aims to clarify the assessment, giving main emphasis to the critical analysis of a fairly recent case, KKO 2016:100, resolved by the Supreme Court of Finland in December 2016. According to the case analysis, the scope of the clause is found to be the decisive factor, concluding a rather problematic rule that conditional claims may only be regarded as ipso facto clauses, if they apply in virtually no other situations than bankruptcy.
