Article

Reimbursement

Note: In connection with the start-up of a computer disk manufacturing facility in Wales, the manufacturer was able to secure a loan in 1983 from the European Coal and Steel Community through National Bank PLC (NatWest). To secure the loan, the manufacturer was required to provide a standby LC for UK£ 2.5 million. The Northern Trust Co. (Chicago) agreed to issue the standby but required 100% cash collateral. The attorneys for Northern drafted the necessary papers. Due to delays, there was pressure to complete the papers so as to obtain the proceeds of the loans. The officials of the borrower, Peters and Taylor, had not fully disclosed the cash collateral requirement to the borrower's Board and there was disagreement about how long the full collateralization would be required.

In any event, the Northern officer submitted to Northern the signed papers including an extract from the borrower's Board Minutes stating that the terms of the loan had been disclosed signed by Peters. Although Peters denied signing it, he was charged with various criminal counts in the UK but was ultimately found not guilty. Subsequently, Northern sued Peters and his wife for a promissory note they had signed and they counter-claimed "for breach of contract and good faith, fraud, negligent misrepresentation, infliction of emotional distress, deceptive trade practices, defamation, and forgery." The bank moved for summary judgment. The U.S. Court of Appeals for the Northern District of Illinois, Andersen, J., applying English granted the motion in part and denied it in part.

The court concluded that there existed a genuine issue of fact as to whether Northern's representative had forged the signature of Peters, noting that under English law forgery served as a basis for other tort counts, as well. The court also agreed with the bank that it did not owe its customers any contractual duty merely because they were customers. It did, however, find "a non-contractual duty in Northern to be honest, to act in good faith, and to be fair in dealing with Peters. We also find that Northern owed Peters a non-contractual duty of reasonable care and skill in interpreting, ascertaining and acting in accordance with his instructions." As a result, Peters was permitted to maintain the count of negligent misrepresentation. Peters was also permitted to maintain a defamation claim for publication of the forgery to the Chairman of the Board of the manufacturer but not to law enforcement officials nor to the corporation itself which was also a customer of the bank.

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