Implied in every contract, including commercial loan agreements, is a covenant of good faith and fair dealing. This means that even if a lender’s actions don’t explicitly violate a specific term of the written contract, they must still act honestly, fairly, and not in a way that undermines the spirit of the agreement or deprives the borrower of its expected benefits. Lender Liability Law Center represents businesses in disputes where lenders have breached this fundamental obligation.
The Implied Covenant of Good Faith and Fair Dealing
This covenant requires that neither party to a contract will do anything that will injure the right of the other party to receive the benefits of the agreement. It doesn’t create new obligations but ensures that the parties perform their existing contractual obligations honestly and fairly.
Examples of Lender Conduct Violating Good Faith and Fair Dealing:
Violations can include a lender abusing its discretionary powers arbitrarily, declaring defaults on minor technicalities opportunistically, or obstructing a borrower’s ability to perform under the loan. Other examples are sudden, unannounced changes in an established course of dealing (like abruptly ending a pattern of accepting late payments), unreasonably refusing to cooperate on essential matters, or exploiting a borrower’s known financial distress in an unconscionable way.
Seeking Redress for Unfair Lender Practices
A breach of the covenant of good faith and fair dealing can cause significant financial and operational harm to a business. If your lender has acted unfairly or in bad faith, even if they claim to be technically compliant with the loan document’s letter, you may have a claim.
How Lender Liability Law Center Can Assist:
We assist by conducting a thorough contractual and factual review of the lender’s conduct, assessing their motives and the actual impact on your business. We then advocate on your behalf through negotiation or litigation to resolve the dispute, seeking remedies such as preventing wrongful actions by the lender or obtaining damages for losses caused by the lender’s bad faith conduct.
If you feel your lender has not dealt with your business honestly or fairly within the context of your commercial loan agreement, it’s important to understand your rights. Contact Lender Liability Law Center to discuss your concerns and explore your legal avenues.