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Note: In an effort to secure funding to build medical clinics, Avanti Medical Group (Debtor) negotiated with BMO Harris Bank (Creditor) for a loan of up to USD 10,000,000. The meetings between the parties resulted in several different agreements of terms, some of which were signed by both parties, and others that were signed by only one. However, only Creditor signed the agreement that was amended to reflect the final amount of the loan.

On the final date of the closing of the loan, Creditor backed out of the closing. Debtor sued Creditor for breach of contract. The trial court granted Creditor's motion to dismiss on grounds that Debtor's claims were barred since the terms exchanged between the parties did not satisfy the statutory requirement for a written credit agreement. On appeal, the Appellate Court of Illinois, in and opinion by Birkett, J., affirmed.

The appellate court ruled that only one party signed the documents relevant to the loan between the Debtor and Creditor, violating the Illinois' Credit Agreements Act Section 2 and consequently barring Debtor's claims.

Text of Statute:

"Section 2 permits a suit based on, or related to, a credit agreement that 'is in writing, sets forth the relevant terms and conditions, and is signed by the creditor and the debtor.' 815 ILCS 160/2 (West 2012)."

Comment: This case strictly enforced an Illinois statute prohibiting a debtor from enforcing a credit agreement because it was not signed by the plaintiff as well as the bank defendant that had signed various documents relating to a proposed loan and commercial LC facility. Many if not most other US states and some other countries have special statutes protecting banks against their alleged commitments to extend credit that are not formally evidenced.

[ALC]

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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.