Traditionally, only borrowers could be held liable to lenders. However, that all changed about thirty years ago when courts began to recognize the liability lenders can have to borrowers. If a lender is treating a borrower wrongly and unfairly, they may be held liable to the borrower.
A borrower may sue a lender for liability in contract or tort. In contract, for example, if a lender had already committed to a loan and did not carry-out its contractual obligation, it could be held liable. Other typical scenarios in which a lender may be held liable involve violating the implied covenants of good faith and fair dealing. Additionally, if the lender failed to take a certain course of action required by the contractual paperwork, liability could arise. Documents that constitute a contract usually include instruments such as loan applications, financial statements, and promissory notes.
A lender can be held liable in tort for issues concerning misstatements or concealment of important facts, or by making threats that cause the borrower to act in a certain way to its detriment. Another way lender liability can arise is if the lender attempts to induce the borrower into breaching another contract, or owes a fiduciary duty to the borrower which is breached. A fiduciary duty usually arises when the lender and the borrower have a confidential relationship, and the lender has used that relationship wrongfully in some way. Circumstances under which a lender can be held liable in tort can arise from both purposeful conduct and negligence.
If you have borrowed from a lender that has acted wrongfully, it is important to protect your business and your assets. Contact an attorney who is experienced in dealing with business matters. Contact Bellavia Blatt, PC at (516) 873-3000 or (631) 224-7000.