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Lender Liability and the Duty of Good Faith. Lender Liability and the Duty
of Good Faith I. Introduction From time to time, lenders ...
... Civil law countries General concept of good faith even in ... A violation of this duty
of care constitutes culpa in contrahendo, which entails liability (courts in ...
... to the criminal aspect and the possible civil liability of the ... Interest can now be
charged as lender and borrower may ... 15] b. It is petitioner’s duty, as a ...
... income isn’t recognized (Lewis, 2001).Liability in Islam is ... borne by the rabbul-mal –
the lender of the ... basis (Ariff, 1998).Basically, the first duty of a ...
... Later the money lender sued for the balance. ... to pay does not admit any pre-existing
liability on his ... case, the directors committed a breach of duty by making ...
Submitted by jrdanilson on March 16, 2005
Category: Social Issues
Words: 7351 | Pages: 30
Views: 231
Popularity Rank: 49,962
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Lender Liability and the Duty of Good Faith
I. Introduction
From time to time, lenders and their attorneys announce that lender liability is no longer an issue with which the lending community needs to be concerned. What usually prompts this proclamation of the death of lender liability is a recent case in which a court has summarily rejected a borrower's claim that the lender violated the duty of good faith and fair dealing. Many courts have rejected borrowers' lawsuits which are based on allegations of the violation of the lender's duty of good faith. Nevertheless, lender liability should continue to be an area of concern to lenders.
Although courts often dismiss cases based on a borrower's claims of lender bad faith, in other cases courts find that lenders have indeed engaged in conduct that constitutes bad faith. Most courts carefully examine the unique facts of each case, consider the testimony of experts, and listen to the ever-inventive arguments of counsel. A loan agreement, like every other contract governed by the Uniform Commercial Code (the "U.C.C."), imposes on both the borrower and the lender "an obligation of good faith in its performance or enforcement." This simple good faith performance obligation may appear to be an uncontroversial codification of a basic, minimal standard of human behavior. It is proving, however, to be problematic to commercial lenders.
Some courts have been quick to hold that, under certain circumstances, a lender, which believed it was merely exercising its contractual rights, nevertheless may have breached the duty of good faith performance obligation. For example, in 1985 the Sixth Circuit, invoking the good faith performance obligation, affirmed a jury verdict awarding $7,500,000 to a borrower whose lender refused to advance funds under a loan agreement, which specifically and unequivocally permitted the lender to exercise sole and absolute discretion to refuse to advance...
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