Cibc Loan RatesInterest on Cibc loans
In a summary of the General Business Rules between the Canadian Imperial Bank of Commerce ("CIBC") and the CWD Division and BF Rich ("Borrower"), concepts such as the amount of the suggested funding, amortisation, interest rates, charges, collateral, a suggested cut-off date and certain specific interpretations have been defined. The suspensive condition (s) have been described in the summary of the General Business Rules as "customary to such transactions", comprising "execution and supply of an accepted loan form and collateral...documentation embodying the condition (s) set out in this summary.
" Mortgagor made the first two payments to CIBC of non-refundable charges totaling $300,000. Prior to the completion of the documents relating to the planned operation, CIBC learnt that the borrower had not fully disclose material facts, such as the fact that there was an interim order forbidding the pledging of BF Rich interests to CIBC as envisaged by the notifying party.
Finally, CIBC abandoned negotiating with the borrower and six years later CIBC was sued for violation of contracts, good-faith and fair conduct and cheating. Following the challenge to a ruling on the defendant's request to reject the challenge, the Complaints Division of the New York Supreme Court essentially raised the issue of whether there was a legally enforceable arrangement between CIBC and the borrower.
According to the cases quoted by the Court, there are two kinds of precontracts. "Any of these shall occur when the notifying party has fully consented (including the understanding to be binding) to all matters which are considered to be in need of discussion...... A second and different type of provisional legally binding arrangement is one that reflects a reciprocal engagement for a treaty on important conditions that have been concluded, while recognising the presence of open conditions that have yet to be bargained for.
While the first kind of agreement is binding on the contracting party, the second only obliges the contracting party to deal with outstanding matters in good faith. 2. The case of Imcan rejected this federal stance in favour of the stance taken in an earlier ruling of the New York Court of Appeals (IDT Corp. v. Tyco Group, S.A.R.L., 13 N.Y. v. Tyco 209 (2009)) and only looked at whether successive arrangements were provided for in the Summary of Terms and Conditions and whether their execution was a requirement for compliance.
Since the summary of the General Conditions explicitly provided for supplementary conditions and documents, the District Attorney's Office found that the notifying party did not wish to be bound until the documents were definitive. In the Tribune case, the federal tribunal may have made the same ruling, but probably for different motives. Tribune Tribunal said that if open conditions preclude a provisional arrangement from establishing a firm obligation, then provisional firm obligations could never be firm, which is not the statute.
It was found in this case that the provisional undertaking is a firm undertaking which obliges the contracting partners "to bargain in good faith in order to settle supplementary conditions which are usual in such an agreement...". "Id " The fact that there are still innumerable pages of relatively conventionally small provisions to be bargained for does not make the deal inoperable.
The Tribune Tribunal, however, took care to differentiate the facts before it from circumstances in which pre-contracts are not designed to commit the contracting partners. "One of the main concerns of the judiciary in such litigation is to prevent the disputants from entering into surprising contract commitments that are never foreseen. A summary of the general conditions in the case of Imcan seems to have included concepts on which the notifying party could not have carried out the proposed operation.
In those particular circumstances, it would have been possible for a tribunal which applied the rules set out in the Tribune case to conclude that the application of the summary of general business practices would have been inconsistent with the intention of both sides. Irrespective of the legal approaches, the case of Imcan reminded creditors that carefully observing the formulation of general business practices and letter of undertaking may be useful in the case of subsequent litigation.
Rather than treat the text of the summary of CIBC's terms and conditions as a miracle weapon to avoid unintentional obligations, however, prudent creditors should consider whether the Tribune case calls for extra caution.