Business Center signs an agreement with Credit Lending Inc. to borrow $40,000 at 20 percent interest. Later, the state legislature passes a law lowering the maximum permissible rate of interest to 15 percent. The borrower's best argument for avoiding payment to the lender is that
A)performance of the contract is commercially impracticable.
B)payment of the loan would force the debtor into bankruptcy.
C)the law has rendered performance of the contract illegal.
D)the specific subject matter of the contract has been destroyed.

Question

Quizplus · Accepted Answer

The new state law lowering the maximum permissible rate of interest to 15 percent makes the originally agreed upon 20 percent interest rate illegal. Therefore, the borrower can argue that the law has rendered performance of the contract (at the originally agreed upon interest rate) illegal.

Business Center Signs an Agreement with Credit Lending Inc