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CRE Finance World, Autumn 2013

As was the case in New Jersey, the Michigan courts in Cherryland strictly applied what they found to be unambiguous provisions of the loan documents even where the obligated party argued against enforcement on equitable grounds to avoid a windfall or the imposition of a penalty. In so doing, the appeals court in Michigan observed: the documents at issue appear to be fairly standardized nationwide, and defendants elected to take that risk — as did many other businesses in Michigan and nationwide. It is not the job of this Court to save litigants from their bad bargains or their failure to read and understand the terms of a contract. (citation omitted). Id. KROLL BOND RATINGS RESTORING TRUST IN CREDIT RATINGS CRE Finance World Autumn 2013 50 The lesson here is that parties signing bad boy guarantees need to be very clear about the extent of the exposure they will undertake. If the intent is to limit the lender’s recovery to the extent of damages actually realized, or to place other limits on enforceability of the carve-out provisions, the documents need to be specific in that regard. In New Jersey, Michigan and elsewhere, the courts will strictly construe unambiguous text, making for a potentially unexpected and unsettling result for the non-recourse carve-out guarantor. Bad Boy Guarantees Strictly Construed KROLL BOND RATINGS’ SEASONED AND EXPERIENCED ANALYSTS OFFER AN IN-DEPTH VIEW INTO CREDIT ANALYSIS TIMELY, TRANSPARENT AND ACCURATE RATINGS. “Courts will strictly construe unambiguous text, making for a potentially unexpected and unsettling result for the non-recourse carve-out guarantor.”


CRE Finance World, Autumn 2013
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