The law prohibits claims and defences relating to a guarantee that is « integral » to a credit contract. In Bank One, Springfield v. Roscetti, 309 Ill. App.3d 1048, 1058-1059 (1999), the Illinois Court of Appeals found that the law prohibited claims and defences on the basis of oral promises to amend a guarantee that « was an integral part » of a credit contract. Several Illinois Federal Court decisions have also ruled that the law is based on claims and defense enforcement and on oral statements relating to a warranty. Westinghouse Electric Corp. McLean, 938 F. Supp. 487 (N.D. III. 1996); Finova Capital Corp.
Slyman, 2002 WL 318294 at 3-5 (N.D. III. February 25, 2002); Household Commercial Financial Services Inc. Suddarth, 2002 WL 31017608 at `4-6 (N.D. Ill. Sept. 9, 2002); LaSalle Business Credit, Inc. Lapides, 2003 WL 722237 at -15 (N.D. III. March 3, 2003); and Daimlerchrysler Services North America, LLC v.
North Chicago Marketing, Inc., 2004 WL 741740 (N.D. III. April 6, 2004). The process of negotiating a loan can often lead to a disagreement between a borrower and a lender over whether a loan has been accepted or what the terms of the loan are. In Illinois, the Credit Agreements Act is designed to ensure the security of the parties in the credit negotiation process. The credit contracts law is not new. It has been around for almost 25 years. But both borrowers and lenders should be aware that the Illinois courts have strictly complied with the requirements of the law and have refused to enforce credit contracts unless they scrupulously comply with the provisions of the law.
The law prohibits claims based on breaches arising from a credit contract. In VR Holdings, Inc. v. LaSalle Business Credit, Inc., 2002 WL 356515 at `3-4 (N.D. Ill. March 6, 2002), a federal district court in Illinois found that the law prohibited claims not only on the basis of oral modifications to credit contracts, but also on the basis of omissions of credit contracts. The law has no exception to « full power. » In Machinery Transport of Illinois v. Morton Community Bank, 293 Ill. App.3d 207 (1997), the Illinois Court of Appeals found that the law prohibited claims on the basis of an oral credit contract, despite the fact that the terms of the oral credit contract were already fully met, which included the « full performance » exception in the list of exceptions to traditional fraud laws that do not apply to the law.
More than ever, commercial lenders should benefit from the protection of the Illinois Credit Agreements Act and reduce their liability risk to lenders by incorporating into their credit contracts the choice of laws and jurisdictional rules that provide for the application of Illinois law and the resolution of disputes by The Illinois courts. The law prohibits claims and defences related to an agreement, a credit contract or a guarantee if the agreement is « integral » to a credit contract. On the basis of similar reasoning, the Illinois Court of Appeals ruled that the law also prohibits claims and defences related to an agreement, with a credit contract or guarantee, if the agreement is an « integral part » of a credit contract. A Nordstrom v. Wauconda National Bank, 282 III.