## Facts

- A seller agreed to sell a Chicago office building for $124 million under a written purchase agreement requiring the buyer to deposit earnest money in escrow.
- The buyer made multiple earnest-money deposits under amendments; the parties later directed the escrow agent to release portions of the earnest money to the seller.
- In two amendments, the parties stated that released earnest money was “deemed earned” by the seller and “non-refundable” except if the seller defaulted or a stated condition to the buyer’s closing obligation failed.
- The original buyer assigned “all of its rights, title and interest” in the contract to an assignee, while remaining liable under the contract.
- During the 2008 financial crisis, a lender withdrew from the buyer’s financing arrangement due to market conditions, and the assignee alleged it could not obtain financing to close.
- The assignee sued seeking equitable rescission and return of earnest money based principally on impossibility of performance.
- The trial court dismissed the complaint for failure to state a claim under Illinois pleading standards, and the assignee appealed.

## Issues

1. Whether an assignee of a real estate purchase agreement may obtain equitable rescission and restitution based on impossibility of performance arising from loss of financing during a credit-market collapse.
2. Whether allegations of inability to secure financing and worsened economic conditions plead legal impossibility (objective impossibility) rather than financial hardship or assumed commercial risk.
3. Whether a buyer (or its assignee) may use impossibility-based rescission to recover earnest money the contract designates as earned and nonrefundable except upon seller default or failure of specified closing conditions.

## Decision

- The appellate court affirmed dismissal for failure to state a claim.
- The court held that the alleged loss of financing and adverse economic conditions did not constitute legal impossibility under Illinois law.
- Because impossibility was not adequately pleaded, equitable rescission and recovery of the released earnest money were unavailable.
- The assignee, standing in the shoes of the assignor, was bound by the contract’s risk allocation and the nonrefundability provisions.

## Legal Principles

- Impossibility of performance is applied narrowly and generally requires objective impossibility, not a party’s subjective inability to perform due to financial incapacity.
- Economic downturns, tightened credit markets, and lender withdrawal typically represent commercial risks borne by the contracting party and do not, without more, excuse performance.
- Equitable rescission may be available when performance becomes impossible, but it requires facts showing a level of impossibility beyond mere hardship or financing failure.
- Express contract terms allocating the risk of nonclosing—such as provisions deeming earnest money earned and nonrefundable except for seller default or failed conditions—are enforced as written.
- An assignee acquires no greater rights than the assignor and remains subject to the same contractual limits and defenses.

## Conclusion

The court rejected rescission based on a buyer’s financing collapse during the financial crisis, enforcing the contract’s express allocation of risk and nonrefundable-earnest-money terms and holding the assignee to the same obligations and limitations as the original buyer.


YPI 180 N. LaSalle Owner, LLC v. 180 N. LaSalle II, LLC, 933 N.E.2d 860 (Ill. App. Ct. 2010)