The doctrine of lender liability refers to the various legal theories a commercial borrower may bring against their lender for purported misconduct. According to the American Bankers Association, breach of contract is the most prevalent theory of lender liability used by borrowers against lenders. The South Florida lender liability claims attorneys at Schecter Law have represented both borrowers and lenders.
Borrowers may claim the lender breached a commitment to fund or renew a loan, breached an oral commitment, or breached Florida contract law’s implied covenant of good faith and fair dealing. If a breach of contract occurred, the lender can be sued as the breaching party. Damages for breach of contract may include the difference between the loan amount and the costs for obtaining a replacement loan. Additionally, damages may include lost opportunity or lost profit resulting from the breach of contract.
Fortunately for lenders, defenses are available in a breach of contract claim. In Florida, a debtor may not maintain an action on a credit agreement unless the agreement is in writing, expresses consideration, sets forth the relevant terms and conditions, and is signed by the creditor and debtor. (Fla. Stat. §687.0304(2)). This is known as Florida’s Banking Statute of Frauds. Additionally, the Parol Evidence Rule prevents a party to a written contract from presenting evidence that contradicts or adds to the terms of the written contract. Nonetheless, a lender must be cautious of all written and oral communications made with a borrower.
Besides being cautious in all communications made with a borrower, one of the best ways for a lender to protect itself is through well-drafted loan documents. The loan documents should disclaim reliance on anything other than what is expressly contained in the loan documents. The loan documents should make it clear that there are no agreements other than what is in the contract and that neither party is relying upon promises not in the contract. An experienced attorney can review lender agreements to help ensure the agreement properly sets forth the relevant terms and conditions and to help prevent potential claims.