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Note: When Jejak Inc. (Applicant/Purchaser) contracted with Ceria (Beneficiary/Supplier) to purchase diesel fuel, AMCSB (Lender) agreed with Applicant/Purchaser to supply a bank guarantee or letter of credit in favor of Beneficiary/Supplier for part of the purchase price, RM10.0 million, as part of a joint venture between Applicant/Purchaser and Lender. However, Lender failed to provide the bank guarantee or letter of credit, claiming that the bank guarantee was only payable directly to the Beneficiary/Supplier.

As a result of this failure, Applicant/Purchaser defaulted on the Sale and Purchase Agreement with Beneficiary/Supplier and paid damages to Beneficiary/Supplier totaling RM406,960.00 and forfeited a deposit previously given in the amount of RM2.0 million.

Applicant/Purchaser then sued Lender for damages for misrepresenting who the bank guarantee or letter of credit was payable to, claiming RM2,406,960.00 in damages. Applicant/Purchaser claimed further damages of RM5,913,760.00 for amounts owed to Beneficiary/Supplier and RM12,225,720.00 for economic loss and loss of potential profit.

The Malaysian High Court awarded Applicant/Purchaser RM2,406,960.00 for damages and the security deposit paid to Beneficiary/Supplier. The court denied Applicant/Purchaser's claim for amounts owed to Beneficiary/Supplier, but stated that Applicant/Purchaser could join Lender as a party in any suit by Beneficiary/Supplier to recover the outstanding balance. The court further denied Applicant/Purchaser's claims for economic loss and loss of potential profit as too remote and speculative, noting that Applicant/Purchaser had not shown any attempt to mitigate its loss through alternative financing.

[JEB/rhw]

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The views expressed in this Case Summary are those of the Institute of International Banking Law and Practice and not necessarily those of ICC or the other partners in DC-PRO.