Originally published August 2010
Across Ireland there are still a significant number of loan
facilities yet to be fully drawn down by borrowers. Draw down
requests may be imminent if green shoots of recovery prove to be
true and then a lender's only recourse may be to rely on the
"material adverse clause" (MAC Clause) so as to avoid its
commitment to lend funds. However, lenders should beware
– wrongfully invoking a MAC Clause may be deemed to be a
breach of contract exposing the lender to claim for damages. There
is virtually no case law on this issue within Ireland and, to avoid
the pitfalls,
Neil O'Keeffe sets out some guidance garnered from
abroad.
A standard MAC Clause states that the lender will not be obliged
to perform its obligations under the facility letter, unless at the
time of so doing, it is, in its absolute discretion satisfied that
no material adverse change has occurred in the borrower's
business, undertaking, assets or financial condition since
