Courts and Financial Contract Disputes

Abstract

Abstract This chapter analyses how courts have dealt with financial contract conflicts. First, the chapter analyses the disputes over the validity of the contract, resulting from problems of the ‘capacity’ to conclude the contract, and the contravention by the contract of mandatory provisions or public policy. Secondly, the chapter analyses the disputes concerning the ‘representations’ made by financial intermediaries to their clients, especially during the marketing stage, including the duties of broker-dealers and financial advisers in the US, the implied duties of transparency of banks during the marketing stage under private law, i.e. absent specific regulatory provisions, and the impact of mandatory provisions that regulate the marketing process, e.g. MiFID rules, or rules on financial advice, in actions under private law, e.g. contract voidness, avoidance, or damages, as well as the challenges when the contract included clauses exempting financial intermediaries from liability, or stating that clients should rely on a specific set of facts. Thirdly, the chapter analyses disputes over the interpretation of financial contracts, e.g. loans or derivatives, including the applicable interpretative standards, the interpretation of events of default, post-default clauses, such as the ‘flawed asset’ provisions under ISDA contracts, or materially adverse change (MAC) clauses.