What is an ipso facto clause? The phrase ipso facto is Latin for “by the fact itself.” Ipso facto clauses are sometimes included in lease and purchase contracts, and they assert that if the lessee or purchaser becomes insolvent, or files for bankruptcy protection, then the contract has been breached. In other words, under such a clause the very act of filing for bankruptcy protection constitutes a breach of contract (hence the appellation, ipso facto clause) that absolves the other party of any further contract obligations.
Are such clauses valid? The short answer is: No.
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