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Note:In this action, the shareholders of the general partner of a limited partnership that was formed for the development, construction, and operation of a power plant in Pennsylvania sued the limited partners for US$ 250,000 under a stock option agreement. Under the terms of the agreement, the general partner was entitled to an additional fee of US$ 250,000 provided that certain conditions were satisfied.

When the construction of the plant fell behind, the general partner was unable to find a company that was prepared to undertake operations and maintenance for the plant. To protect its investment, the limited partner formed a subsidiary to undertake the work. To obtain the consent of the primary lender, Swiss Bank Corp., it was necessary that the subsidiary post an LC to support its US$ 2 million cost overrun guarantee.

One of these conditions to the general partner earning the additional fee was that Swiss Bank Corp. "cause the release" of the LC. The trial court concluded that this condition was met when the LC expired by its own terms. On appeal, the court reversed, ruling that:

"[T]he requirement that Swiss Bank 'release' the letter of credit must be understood as requiring that Swiss Bank consent to an early termination of the letter of credit. Merely allowing the letter of credit to expire in accordance with its terms cannot be considered a release of the letter of credit, because allowing the natural expiration of the letter of credit did not require Swiss Bank to give up anything to which it had an enforceable claim."

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