0370 270 6000

already registered?

Please sign in with your existing account details.

need to register?

Register to access exclusive content, sign up to receive our updates and personalise your experience on brownejacobson.com.

Privacy statement - Terms and conditions

recovery of future losses as a result of a prepayment - watch the drafting!

18 October 2012

In an early termination situation lenders sometimes look to recover lost income during the remainder of the term - this is particularly relevant to ABLs and invoice financiers. This case does not say recovery cannot be made but does make it clear that the wording of the indemnity is crucial.

The recent case of K/S Preston Street v Santander (UK) plc [2012] EWHC 1633 (Ch) considered a loan agreement which permitted prepayment but provided that the borrower would, in addition to any prepayment fee, indemnify the bank against any losses that were incurred due to the prepayment of the loan before the maturity date. This included the loss of fees and interest during the remainder of the term. The High Court held that, under the indemnity, the bank could recover the losses incurred up to the date the loan was prepaid, but could not recover anticipated future losses.

The reason given for the decision was that the agreement itself did not explicitly provide for the recovery of future estimated losses under the indemnity, therefore this could not be claimed by the bank. Given prepayment was permitted by the agreement, the bank could not recover losses calculated on the basis of a breach of contract and so its entitlement to recovery was limited by the scope of the indemnity.

The learning point is that drafting indemnities needs to be carefully considered if the expectation is recovery of future estimated losses for a permitted course of action (i.e. prepayment) under an agreement.

focus on...

Private sector development club

Watch our first virtual private sector development club, where we guide you through a variety of topics relevant to property development, including updates on leasehold reform and planning law, plus a guide through the negotiation of promotion and option agreements.

View

Legal updates

Corporate Insolvency and Governance Bill: An overview of the significant reforms to the UK’s restructuring and insolvency regime

On 20 May 2020, the UK government published the long-awaited Corporate Insolvency and Governance Bill (the Bill) to implement the temporary measures announced by the Business Secretary on 28 March 2020 and the long planned measures contained in the government’s consultation in August 2018.

View

Legal updates

Cabinet Office advice for contractual behaviour which is impacted by the Covid-19 emergency

On the 7th May 2020, the Cabinet Office released its guidance on responsible contractual behaviour for both public and private sectors relating to the performance and enforcement of contracts which have been “materially impacted” by the coronavirus.

View

Legal updates

Implications of the coronavirus on leisure providers

Due to covid-19 restriction, gyms and leisure centres are temporarily closed to reduce the spread of the disease. Nevertheless, the impact this has on leisure providers is critical due to loss of income and their limited cash reserves.

View

The content on this page is provided for the purposes of general interest and information. It contains only brief summaries of aspects of the subject matter and does not provide comprehensive statements of the law. It does not constitute legal advice and does not provide a substitute for it.

mailing list sign up



Select which mailings you would like to receive from us.

Sign up