Ken Ward was an Illinois farmer who worked land owned by his father-in-law, Frank Ruda. To finance..

Ken Ward was an Illinois farmer who worked land owned by his father-in-law, Frank Ruda. To finance his operation, he frequently borrowed money from Watseka First National Bank, paying back the loans with farming profits. But Ward fell deeper and deeper into debt, and Watseka became concerned. When Ward sought additional loans, Watseka insisted that Ruda become a guarantor on all of the outstanding debt, and the father-in-law agreed. The new loans had an acceleration clause, permitting the bank to demand payment of the entire debt if it believed itself “insecure”; that is, at risk of a default. Unfortunately, just as Ward’s debts reached more than $120,000, Illinois suffered a severe drought, and Ward’s crops failed. Watseka asked Ruda to sell some of the land he owned to pay back part of the indebtedness. Ruda reluctantly agreed but never did so. Meanwhile, Ward decreased his payments to the bank because of the terrible crop. Watseka then “accelerated” the loan, demanding that Ruda pay off the entire debt. Ruda defended by claiming that Watseka’s acceleration at such a difficult time was bad faith. Who should win?

 

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