UPDATE 2-Dow says Rohm agreement not binding at this point

* Dow argues merger not binding under current conditions

* Dow says deal would jeopardize both companies (Adds Rohm and Haas response, quote from Dow’s lawyer, CEO, and background)

NEW YORK, Feb 3 (Reuters) - Dow Chemical Co DOW.N argued on Tuesday that its agreement to buy rival Rohm and Haas Co ROH.N is not binding under current conditions, claiming a deal closing now would jeopardize both companies.

Rohm and Haas disagreed with Dow’s claims, saying that the deal should be closed as is. It suggested Dow should consider a number of strategic moves to be able to finance the deal, including cutting its dividend to 1 cent per share and putting assets up for sale.

Dow laid out its legal defense for delaying or walking away from the more than $15.3 billion deal in a response to Rohm and Haas’ lawsuit filed in Delaware Chancery Court on Tuesday.

In its 62-page filing with the court, Dow argued that “a confluence of dramatic and unforeseeable shocks” have hit the company, the chemical industry and the economy as a whole that make the deal impracticable.

Dow also argued that Rohm and Haas’ shareholders have no contractual right to the closure of the deal and that a court order forcing Dow to complete the deal would cause undue hardship to “Dow, Dow’s shareholders, Rohm and Haas itself, the employees of both companies, and the general public.”

Dow Chemical refused to close its takeover of rival Rohm and Haas Co late last month, after a key joint venture with Kuwait fell apart. Dow had intended to use proceeds from that transaction -- a $17.4 billion plastics joint venture -- to help fund the Rohm deal.

Rohm and Haas sued Dow, arguing that the chemical company has no legal basis to walk away from the deal and asking a Delaware court to order it to complete the transaction.

But Dow argued in its response that Delaware Chancellor William Chandler, the judge hearing the case, should not issue such an order.

“You are talking about the court issuing an order that is irreversible and forever,” Dow’s lawyer David Bernick, a partner at Kirkland & Ellis, said in an interview.

“The facts as they are show tremendous risk and uncertainty. The crux of the trial will be to demonstrate what those uncertainties are and how the risks that are created will substantially compromise the viability of any merged entity. Common sense and equity say let’s see what the future risks are for this company,” he said.

Lawyers have said the merger agreement is very tight and Dow, the largest U.S. chemical maker, has limited wiggle room to back out.

Dow Chief Executive Andrew Liveris said on his company’s earnings call, also on Tuesday, that the company would “need to be accountable for its decision not to close the Rohm & Haas acquisition at this time.”

He said there were mitigating factors which should not force an untimely closing, but noted that the conflict could result in a damages award against Dow.

In midday trading, Dow Chemical shares were up 13 cents or 1.2 percent at $11.18 and Rohm and Haas shares were up $1.61 or 3.1 percent at $53.61. (Reporting by Michael Erman, editing by Dave Zimmerman and Gerald E. McCormick)