When a Financial Crisis Triggers a Force-Majeure Event

In 2008, Donald Trump sought declaratory relief from a $40M personal guarantee to Deutsche Bank.1 In his complaint, filed in the Supreme Court of New York, Trump raised the defense that the once in a lifetime economic downturn, was an economic tsunami, which indemnified his performance of the guarantee under the contract’s Force Majeure clause.2 In the ensuing litigation, Deutsche Bank filed its own complaint and moved for summary judgement.3 The case was settled prior to adjudication on the merits.4 While Trump’s argument that the credit tsunami qualified as a force-majeure event5 appears meager on its face, he may have been on to something.

The doctrine of impossibility holds that a party should be excused from performance of a contract when the performance is made impracticable.6 This doctrine is usually expressly contracted into a force-majeure clause. The term “Force-Majeure” is French and directly translates to “a superior force.”7 In a legal sense, Force Majeure is an affirmative defense that encompasses events which can neither be anticipated nor controlled to the extent that it prevents a party from performing their obligations.8 The events which constitute a force-majeure event depend on the wording of the clause within the contract.9 Generally, economic hardship does not constitute a force-majeure event.10 In addition, a party may not invoke a force-majeure clause to excuse performance when it could have been prevented by the exercise of prudence or due care.11

The financial crisis of 2008 is the most serious recession since the Great Depression of the 1930s.12 As a result, many loans defaulted.13 The affirmative defense that the financial crisis made performance impossible, and qualified as a force-majeure event, was used by several defendants. While the affirmative defense has never reached the appellate level, several district courts have analyzed whether the financial crisis was a force-majeure event. Surprisingly, their results were mixed.

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For the Love of God, Change Your Default Passwords: The Existential Threat of the Internet of Things

“We’re building an internet that senses, thinks, and acts. We’re building a world-size robot, and we don’t even realize it.” — Bruce Schneier

“What is this ‘Internet of Things’ and what does it have to do with me?”

Everyone is familiar with the Internet of Things, even if they don’t know it by its official name. It’s a catch-all term referring to every device with Internet connectivity which is not a PC, tablet, or smartphone. For several years now, tech manufacturers have been enamored with the idea of making everything from baby monitors to body sensors capable of Internet access—ostensibly so the data those devices collect can be used to enhance the convenience and efficiency of the lives of their users. Internet of Things devices have become standard in nearly every industry, from the usual suspects (routers, security cameras, DVRs) to the trendy newcomers (toasters, refrigerators, coffeemakers). Internet of Things devices can also include modern cars, which are built with sensors that notify drivers of dangerous conditions—and modern homes, which come with WiFi-connective thermostats that manage energy consumption.

Internet of Things devices aren’t limited to everyday consumers. There’s room on the bandwagon for corporations and governments as well. For example, cities install a type of Internet of Things device on streetlights to adjust light output by time of day, season, and weather conditions.1 Farmers use data gathered from sensors monitoring soil moisture, pesticide usage, and weather forecasts to remotely oversee their farms’ resources and quickly identify crop issues.2 The Internet of Things has even been used for wildlife conservation—a research group fitted the lions of southern Kenya with tracking collars, which communicate their location to the researchers via text message (as well as to the local cattle herders, who have a vested interest in knowing the location of the nearest lion at all times).3

With its widespread adoption by consumer goods, corporations, and governments, the Internet of Things has become inextricably entwined with modern society. This is unlikely to change, as the number of devices which are members of the Internet of Things currently exceeds that of the human population and is conservatively estimated to surpass 50 billion by 2020.4 The allure of the Internet of Things is understandable—it represents the possibility of a global network of convenience and prosperity. However, the manufacturers responsible for this brave new world overlooked a fatal flaw in their frenzy to capitalize on it—namely, the security (or lack thereof) of the devices with which they have flooded modern society. The fact that the market has permitted this to happen cries out for government intervention in the form of regulation or legislation.

Continue reading “For the Love of God, Change Your Default Passwords: The Existential Threat of the Internet of Things”