Loan Participation Agreements: Catching Up With Contract Law

Thursday, January 1st, 1987 at 12:00 am by W.H. Knight, Jr.
W.H. Knight, Jr., Loan Participation Agreements: Catching Up With Contract Law, 1987 Colum. Bus. L. Rev. 587

The true participated loan is a shared financial relationship, with participants vesting tremendous discretion and reliance in the lead. If a lead fails to meet the obligations reasonably expected under the arrangement, even a corporate participant like a bank can be protected only through judicial intervention. Modern contract law demands that courts examine loan participation arrangements beyond the four corners of the document and impose responsibilities on the lead to protect the best interests of loan participants. Only through the implication of such responsibilities can courts preserve loan participations as viable financing instruments.

Author Information

Associate Professor of Law, University of Iowa. B.A. University of North Carolina at Chapel Hill; J.D. Columbia University.