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Clifford Chance

Clifford Chance


Recent Fifth Circuit Decision Highlights Importance of Clarity and Specificity When Discussing Terms of Loan Trade

30 April 2013

A recent Fifth Circuit decision serves as a reminder to loan market participants that they should choose their words very carefully when discussing terms of a trade over the telephone. The Fifth Circuit Court of Appeals recently ruled that a bank loan purchaser can pursue a breach of contract claim against a seller that, the purchaser claims, wrongfully backed out of a deal. In Highland Capital Management, L.P. v. Bank of America, National Association, the Court reversed a decision by the District Court for the Northern District of Texas dismissing a breach of contract claim brought by Highland Capital against Bank of America over a debt trade. The Fifth Circuit found there was sufficient ambiguity regarding the parties' dealings to warrant a deeper look into the trade in order to discern whether the parties intended to be bound by the deal they reached over the phone.

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