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Current Developments in the Commercial Divisions of the
New York State Courts
Posted: November 29, 2016

Party Could Not Raise Illegality Defense After Other Party Had Performed

On November 16, 2016, Justice Singh of the New York County Commercial Division issued a decision in Baosteel Resources International Co. Ltd. v. Ling Li, 2016 NY Slip Op. 32295(U), holding that a party could not raise the illegality of a contract as a defense after the other party had performed, explaining:

Allowing the defense of illegality would result in an unwarranted forfeiture by plaintiff and reward the defendants with a large windfall. This type of use of claiming illegality after the fact as a sword for personal gain is disfavored under New York law. Plaintiff has fully performed its obligation to wire the money for the deposit, and New York law clearly prohibits the deposit transforming into a windfall for defendants. The Court thus refuses to acknowledge illegality as a defense.

(Internal citations omitted).

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