Forbearance Agreements: What You’re Actually Giving Up To Buy Time
What Is A Forbearance Agreement And When Does A Party Typically Sign One? A forbearance agreement is a contract where a lender waives certain rights or remedies in exchange for giving the borrower additional time to make payments. This usually occurs after a default has taken place, as a way to avoid court proceedings and […]
Loan Documents in Practice: What Actually Matters After Default
How Does Life Change For A Borrower After A Default? Before a default, borrowers focus on running their businesses. Once default hits, their primary concern shifts to dealing with creditors and making payments to prevent further damage. The impact depends on the creditor’s approach; large institutions may have lengthy compliance processes, while smaller creditors might […]
Understanding Ucc Filings And Security Interests
What Threshold Issues Do Courts Examine To Determine If A Security Interest Has Attached When A Lender Files A Ucc-1? A security agreement is a contract between a debtor and a creditor that grants the creditor rights in certain collateral. The first issue courts examine is the type of collateral involved. The next step is […]
Understanding Unconscionability In Commercial Disputes
How Do Courts Distinguish Between Procedural And Substantive Unconscionability In High-dollar Agreements? Unconscionability in legal terms refers to contracts that are extremely unfair. Courts evaluate this using two components: substantive and procedural unconscionability. Substantive unconscionability deals with the actual terms of the contract, which may be overly harsh or one-sided. Procedural unconscionability considers the conditions […]
Understanding Choice Of Law Clauses In Contracts
What Threshold Issues Do Courts Examine When Applying A Choice Of Law Provision In A Contract? Courts generally uphold the freedom of contract, assuming parties enter agreements voluntarily. However, in California, for example, a high standard must be met to override the chosen law. This involves demonstrating that applying the selected law would contravene a […]
Understanding Personal Guarantees In Commercial Financing
What Does A Limited Guarantee Usually Restrict In Commercial Financing Agreements, And How Does It Operate In Practice? A limited guarantee in commercial financing agreements is meant to restrict the guarantor’s obligations to specific instances or conditions. However, in practice, limited guarantees may not always provide the expected limitations. Despite being labeled as limited, these […]
Engineered Default: How Some Contracts Are Drafted So You Fail on Day One
What does engineered default mean in the context of high-risk financing like MCAs? An engineered default in high-risk financing, such as Merchant Cash Advances (MCAs), occurs when a borrower essentially defaults upon signing the deal. Borrowers often unknowingly enter into agreements where default triggers are built in, setting them up for failure from the start. […]
When a “Receivable Purchase” Is Really a Loan: How Courts Recharacterize MCA Deals
What are the key factors that courts consider to determine if a contract labeled as a purchase of future receivables is actually a loan? Courts primarily look at three components when analyzing a receivable purchase agreement (MCA agreement) to determine if it is a loan. These components include whether there is a fixed payment term, […]
Jurisdiction and Choice of Law: Why the Same Case Wins in One State and Fails in Another
What is the distinction between jurisdiction and choice of law in business contracts, and why are they often confused? Jurisdiction refers to where legal battles take place, such as in federal or state courts or arbitration. Choice of law determines which state’s laws will apply to the contract. These factors are crucial in contracts as […]
What documents typically initiate a civil case against a company, and what do they contain?
When a civil case begins against a company, the process is usually initiated with a fat packet from a process server or by certified mail. This packet includes the complaint, which outlines the reasons for the lawsuit, the summons which gives a timeframe for response, and additional documents depending on the court, such as […]