Credit agreements require the liability of both the creditor and the debtor. Both are required to comply with the terms of the loan by making timely payments and correctly recording those payments. If a lender does not maintain its end of contract, it can result in a fraud and lender liability action. Disputes over credit terms can lead to a stressful situation for all parties involved. The experienced team at Marshack Hays LLP understands the tensions caused by this type of disagreement and will work tirelessly to ensure that your rights are protected and that you are able to find acceptable negotiating conditions. The most frequent recourse pursued by borrowers in the event of a breach of a credit agreement is the recovery of damages. This can include both the difference between the loan amount and the cost of obtaining a replacement loan, as well as any missed opportunities or lost profits. An aggrieved party could approach the same “Lender-in-Control” theory from a slightly different angle by accusing the lender of unlawfully disrupting its contractual relationship with the borrower. To do this, the party (1) must prove a contract with the borrower, 2) that the lender knowingly induced the borrower to break that contract; (3) that the lender`s interference was intentional and inappropriate with respect to the reason or means and (4) that the party had been harmed by the lender`s actions. Courts interpreting the “inducement to knowledge” element of this right require that the lender has provided “substantial support” to the borrower by affirmatively supporting the infringement or by helping to conceal the infringement or not acting in such a way as to enable the infringement.
Generally speaking, the courts consider that a lender has no positive obligation to protect other creditors or to take into consideration the interests of creditors other than himself. In other words, it is not inappropriate for lenders to pursue their own economic interests. Asking for a debt repayment in good faith is not a corrupt incentive that would create lender liability. Credit agreements often give lenders the right to “seize” credit – that is, to demand full payment immediately – if the borrower violates its terms. The language of the treaty that allows this is called the acceleration clause. For example, mortgage contracts may contain acceleration clauses that come into effect when the borrower misses too many payments, won`t secure the home, or doesn`t live in it. However, if a lender tries to inappropriately accelerate and call the loan, while the borrower has blocked its end of business, this is a breach of contract. Even if the acceleration is justified, it can still be an offense if it is not carried out under the terms of the agreement – for example, a lender who puts a house in foreclosure without informing the borrower of the acceleration. When PCA failed to make its oral commitments and made inappropriate claims regarding the mortgage, the claimants filed a complaint. PCA defended itself on the basis of the rule of parol proof.
. . .