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Copyright © International Chamber of Commerce (ICC). All rights reserved. ( Source of the document: ICC Digital Library )
2014 LC CASE SUMMARIES 2014 WL 1404473 (N.D. Okla.) [U.S.A.]
Topics: Contract to provide LC, Specific Performance
Type of Lawsuit: Insurer sued Principal for specific performance of an indemnity agreement by requiring Principal to provide an LC and pay attorney's fees for the suit.
Parties: Plaintiff/Insurer-Travelers Casualty & Surety Company of America Defendant/Principal-Samson Investment Company
Underlying Transaction: Indemnity for bonds issued by Insurer to Principal.
LC: Standby LC. Silent as to amount and governing rules.
Decision: The U.S. District Court for the Northern District of Oklahoma, Payne, J., granted Insurer's motion for summary judgment.
Rationale: Specific performance of an indemnity agreement to cause an LC to be issued will be granted when there is no adequate remedy at law, the agreement is just and has adequate consideration, the terms of the agreement are definite for enforcement, and the performance sought is substantially identical to the terms of the agreement.
Article
Factual Summary: Principal requested Insurer to issue bonds and act as surety for it in favor of several obligees. As consideration of issuing the bonds, Principal entered into an indemnity agreement requiring Principal to release Insurer from the bonds or collateralize any remaining liability at Insurer's demand. The indemnity agreement also required that a surety be obtained to assure recovery of any losses should the indemnity agreement be enforced by Insurer.
The indemnity agreement also provided that Principal waived the right to contest the agreement and that Insurer was entitled to specific performance. The agreement also stipulated the evidentiary requirements for a prima facie case under the agreement.
After the agreement was executed, Insurer made four demands for Principal to discharge it from the bonds. Insurer then filed suit contesting that Principal failed to perform its contractual obligations under the agreement. All but one bond was released.
As to the remaining bond, the court granted a preliminary injunction requiring Principal to provide the LC pending further proceedings in the case. Insurer then moved for summary judgment. After arguments, the court granted the motion for summary judgment and awarded specific performance of the indemnity agreement and awarded attorney's fees from the LC.
Legal Analysis
1. Specific Performance: The court noted that specific performance is only granted when the equities are weighed in favor of the petitioning party stay the grounds on which courts generally grant specific performance for sureties, namely, "(1) it has no adequate remedy at law; (2) the indemnity agreement is just and reasonable and supported by adequate consideration; (3) the terms of the indemnity agreement are sufficiently definite to allow enforcement by the court; and (4) the performance sought is substantially identical to that promised in the indemnity agreement." Because Insurer met all the requirements, the court granted specific performance.
[JAH]
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This article represents the views of the author and not necessarily those of the ICC or any of the other partners in DC-PRO.