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PI 180 N LaSalle Owner, LLC v 180 N LaSalle II, LLC, 403 Ill App 3d 1, 933 NE2d 860, 342 Ill Dec 879 (1st D, 2010).

Facts:On August 12, 2008, 180 N. LaSalle II, LLC (LaSalle), as seller, and Younan Properties, Inc. (Younan), as purchaser, entered into a purchase agreement contract for property at 180 North LaSalle Street, Chicago, Illinois. The purchase price of $124 million (less earnest money) was to be deposited with an escrow agent two business days prior to closing. Younan deposited $2.5 million initial earnest money in the escrow account. From August 29, 2008, to September 30, 2008, the parties executed three amendments to the contract. These amendments resulted in a $500,000 reduction in purchase price, $3.5 million more deposited in the escrow account, and $1 million released from the escrow account to LaSalle as non-refundable earnest money that was recoverable only in the event of LaSalle's default.

On October 9, 2008, Younan assigned all its rights, title, and interest in the contract to YPI. The assignment provided that Younan remain liable under the contract. Younan then found out that one of its lenders had pulled out of the financing arrangement because of economic conditions. Between October 15, 2008, and December 9, 2008, LaSalle and YPI executed additional amendments that released more non-refundable earnest money to LaSalle, extended the closing date to December 17, 2008 and then February 18, 2009, reduced the purchase price by $4 million, and acknowledged the assignment and continuing liability of Younan.

When Younan failed to close on purchase of the commercial property, LaSalle terminated the contract and retained the deposited earnest money as its sole remedy for breach of the contract. YPI then filed the underlying complaint against LaSalle seeking to rescind the contract and recover $6 million in earnest money retained by LaSalle. YPI argued that pursuant to the doctrine of impossibility of performance, it was excused from performing under the contract as a result of the 2008 global credit crisis, which it claimed prevented it and Younan from obtaining the commercially-practical financing contemplated when the contract was originally formed.

The trial court granted LaSalle's Section 2-615 motion to dismiss, striking YPI's complaint with prejudice and without leave to amend. This appeal followed.

Holding:Affirmed. LaSalle contended that Younan waived its right to seek rescission of the contract and that therefore, YPI, as assignee of the contract, lacked standing to seek rescission of the contract. LaSalle contended that after Younan had entered the contract and learned of the 2008 global credit crisis, it reaffirmed the contract by assigning the contract to YPI and subsequently executing amendments to the contract.

LaSalle maintained that the reaffirmation of the contract resulted in a waiver by Younan of its right to seek rescission of the contract, and that YPI, as an assignee, lacked standing to rescind the contract. The right to rescind a contract is waived if the right is not exercised promptly upon the discovery of facts that confer the right to rescind. The court found that nothing in the record suggested Younan or YPI possessed sufficient knowledge of the 2008 global credit crisis to justify rescission of the contract at the time the amendments were made. Accordingly, the court found that YPI had standing and the right to rescind the contract.

Next, the court determined that Younan's and YPI's failure to obtain commercially practical financing was not an adequate ground to rescind the contract under the doctrine of impossibility of performance. YPI argued that its performance was impossible due to the 2008 global credit crisis, which it claimed prevented it and Younan from obtaining the financing contemplated when the contract was originally made. The court found this argument misplaced because the primary issue was whether it was foreseeable that a commercial lender might not provide the requisite financing, and even without the global credit crisis it was foreseeable that a commercial lender may not have provided financing.

Failure to obtain financing is generally a foreseeable risk that can be guarded against through financing contingency provisions. Further, the doctrine of impossibility of performance does not excuse performance if Younan or YPI had the ability to remove the obstacle to performance. Younan had over $1.6 billion in assets and nothing in the record indicated Younan could not have paid the purchase price. Thus, the court found that the trial court properly struck YPI's complaint with prejudice and without leave to amend pursuant to section 2-615 of the code.

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