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Summaries and analysis of recent Delaware court decisions concerning business-related litigation.
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Superior Court CCLD Holds that Contract Defenses Can Be Applied to a Declaratory Judgment Action
Under Delaware law, contract defenses can apply to a declaratory judgment action when the action is one based on legal rather than equitable claims. In this matter, the Complex Commercial Litigation Division of Delaware’s Superior Court partially granted Bobcat’s partial motion for summary judgment stemming from its acquisition of a waste management business from Inland. Bobcat sought a declaratory judgment that it was entitled to claw-back / redeem an equity payment under the parties’ purchase agreement (the “UPA”) because the necessary condition to prevent the claw-back did not occur. Inland countered with the affirmative contract based defenses of impossibility/impracticability and prevention of performance.
Because Bobcat’s claim was based solely on a contract provision, which made it a legal claim, Inland’s contract defenses of prevention of performance and impossibility were applicable to the claim. Nonetheless, the Court found that the UPA was unambiguous in its terms. Inland knowingly assumed the risk that the condition preventing the claw-back might not occur and the terms of the UPA stated that if the condition did not occur, Bobcat could automatically redeem the equity. Therefore, the Court rejected Inland’s affirmative defenses as a matter of law and granted Bobcat’s motion for summary judgment on its claim to redeem the equity payment.