Article

Note: In connection with its application for a US$41,600,000 line of credit to provide LCs to fund commodity purchases, Capital Investments-USA, Inc. (Commodity Buyer) entered into a series of communications with Keybank National Association (Putative Issuer). These communications included emails, commitment letters, and various other documents addressed to Commodity Buyer from Putative Issuer. When Putative Issuer refused to extend the line of credit and issue the LCs, Commodity Buyer sued it for breach of contract and negligent misrepresentation.

Putative Issuer moved to dismiss on the basis that there was no writing signed by it as required by the Colorado Credit Agreement Statute of Frauds, Colo. Rev. Stat. § 38-10-124 (2007). This provision applies to all credit agreements with a principal balance greater than US$25,000. The court converted the motion to one for summary judgment and granted it in favor of the Putative Issuer.

The court rejected Commodity Buyer's argument that the various emails and other communications should be taken cumulatively to satisfy the writing requirement. The court stated that the statute required that the writing establish a credit agreement and forbade implying one. It also declined to expand the Credit Agreement Statute of Frauds to encompass multiple writings.

Comment:

The requested LC was to be "non-operative," a concept explained by the Commodity Buyer as meaning "negotiable only upon receipt, inspection and third-party insurance of the product." From reported correspondence it was unclear whether the Bank was to issue or advise these LCs. In either case, a bank should exercise caution before entering such a transaction.

The Commodity Buyer also obtained communications from Bank employees addressed "To whom it may concern" to the effect that Commodity Buyer had the ability to obtain certain goods or was free from "liens and penalties" with the Bank and "has proven to be reliable and capable of fulfilling its assumed liabilities." It is questionable why a bank employee would make such statements which contain some earmarks of fraudulent schemes.

[JEB/plc]

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