The question remained, therefore, what costs/losses the bank would recover. Could it recover both its past and foreseeable loss of interest at the contractual rate, net of what it could earn to borrow money on the interbank market? The judge found that, as the claim was not based on a breach of contract (since the loan contract authorizes prepayment), the Sanctions Act (and the assessment of future losses) was not applicable. He therefore found that the bank had to see its actual loss on the basis of the borrower`s contractual right to an early down payment. Many contracts contain reciprocal compensation (each party is therefore obliged to compensate the other party for the losses incurred by that other party). However, in the case of loan contracts, it is customary for only the borrower to accept the lender`s compensation. The lender will not agree to compensate the borrower. This is due to the strength of the lender`s negotiating position in relation to the borrower. Guarantees and compensation are used by borrowers to protect themselves against the risk of debt default, which means that they are unable to meet their loan contract obligations. Because of their function, lenders will generally seek a guarantee or compensation, especially if they have doubts about the borrower`s creditworthiness. In short, lenders seek additional collateral by having a guarantor/exempt taker to cover the borrower`s obligations under the loan agreement. Guarantees and compensation are two different types of contracts and come into force at different times in the contractual relationship. First, the court had to decide whether this clause applies to advances.
The borrower argued that the indemnity clause applied only to the “repayment” of the loan and not to the “down payment.” The loan agreement clearly distinguished between the two and had a separate down payment clause that defined the fees to be paid at the time of the down payment. It argued that any ambiguity against the bank should be interpreted as the editorial party (contra proferentum). The bank argued that this analysis was patently flawed and made no commercial sense under the agreement. GRAPHIC 1: In general, the lender is a bank that requires a guarantee to be taken care of to ensure that the loan is repaid, even if the borrower is late for payment. The judge rejected the borrower`s argument and found no ambiguity in the text.