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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.

training and events

16Jan

Maximising Public Sector Opportunities Workshop London office

Suppliers often comment that the public procurement regime does not provide a great deal of detail around the role of challenge during a tender process. When taking part in a public sector tender process do you really want to challenge what the contracting authority is doing as it may disadvantage your submission?

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focus on...

Richard Nicholas provides a data protection update

As part of our regular updates for in-house lawyers, Richard takes a look at what has changed in data protection law over the last six months

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Employment law updates - hear from Harry Taylor

As part of our regular updates for in-house lawyers, Harry looks at some topics that frequently arise in Employment Tribunal claims.

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IR35 Tax update - hear from Andrew Noble

Andrew discusses changes to IR35 tax rules which are due to be implemented in April 2020

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Care Quality Commission and health & care regulatory update 7 November

Carl May-Smith provides an update on CQC & Competitions & Markets Authority enforcement.

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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.

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