A borrower's material contracts can have a significant
impact on a lending transaction. These contracts affect the rights
and obligations of the borrower, the value of the borrower's
assets and overall financial performance of the business and
potential restrictions on the ability of the lender to enforce
against those assets.
Review of the borrower's material contracts is often the
most important aspect of the due diligence process because they
have an effect over these fundamental aspects of lending
transactions.
This article sets out a brief methodology for approaching the
review of material contracts.
Why is a particular agreement being reviewed?
The borrower will likely have many written agreements with third
parties. It is likely not necessary, practical or even possible for
a lender to review all of those agreements. Similarly, lenders must
recognize that locating and putting forward copies of contracts for
the lender to review may represent a
