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Contracts — allocation of risk

U.S. Court of Appeals for the 7th Circuit


Contracts — allocation of risk

Where sophisticated parties allocated risk, a contract is enforceable although it provides no remedy for its breach.

“We see no reason to reject the parties’ allocation of risk, even if this means that SFG will be uncompensated for McFarland’s breach. Wisconsin courts enforce agreements in which parties allocate risk in advance. See Brooks v. Hayes, 395 N.W.2d 167, 175 (Wis. 1986). SFG is a sophisticated, repeat player in the distressed-assets business. It could have negotiated a different contract had it wanted to shift more risk to McFarland. In that case, however, McFarland might have demanded more than 29 cents on the dollar for the portfolio. Cf. Wis. Power & Light Co. v. Westinghouse Elec. Corp., 830 F.2d 1405, 1412 (7th Cir. 1987) (Wisconsin law) (‘Wisconsin Power cannot accept the favorable purchase price and then disclaim the conditions underlying that price.’).”


13-3378 Southern Financial Group, LLC, v. McFarland State Bank

Appeal from the United States District Court for the Eastern District of Wisconsin, Joseph, Mag. J., Wood, J.

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