In the state of Illinois, if any part of an agreement is deemed to be part of a credit agreement under the Illinois Credit Agreements Act, and if the agreement is not signed by both parties, then a debtor may be prevented from filing certain claims, defenses, and counterclaims against a lender. A credit agreement by definition is any agreement that a creditor creates to lend money, forbear payment, or extend credit to a debtor for commercial purposes. This Act says that unless both parties sign the written agreement, it is unenforceable. This is particularly harsh on debtors who attempt to sue their creditor for conduct made in retaliation to the agreement or for deceptive statements. It expressly prohibits debtors from claims and defenses of fraud, equitable estoppel, and partial performance based on the oral conduct or statements of the lender. Before entering into a credit agreement, it is important for debtors and lenders to consult a finance and lending attorney.
When Does the Act Apply?
The Illinois Credit Agreements Act applies to all commercial credit agreements or other non-credit agreements that are part of a commercial credit arrangement. The requirement of both parties signing the agreement or amendment applies to not only the initial credit agreement, but also any amendments and modifications of such agreement. Even if only a small part of the agreement would be considered a credit agreement, the Act still applies. This Act provides significant protection for commercial lenders, but it leaves debtors vulnerable in many situations.
What Are Oral Statements?
If there is an existing credit agreement between a debtor and a lender, and before the maturity date of that agreement occurs, the lender may agree over the phone to extend the agreement. The lender may even send an email summary of the oral promise. However, to be enforceable, the promise must be made in writing and signed by both the debtor and the lender. Without a signed document, the lender can change their mind and demand that the full amount be paid by the debtor when the original maturity date approaches.
Never Rely on Oral Statements
If a lender makes any promises through email, over the phone, etc., but fails to put them in writing, there is very little that a debtor can do to enforce such agreements under the Act. The debtor will likely not be able to claim fraud, breach of contract, promissory estoppel, or other claims/defenses. These will be barred because there is no written agreement that has been signed by both parties.
Contact an Experienced Chicago Finance and Lending Lawyer
It cannot be stressed enough that if you are a debtor or lender that is considering entering into a credit agreement or commercial loan, you need to seek the assistance of an experienced DuPage County business law attorney. Failure to do so could result in you being denied certain legal protections. Contact the attorneys at Momkus LLC by calling 630-434-0400 and schedule a consultation to discuss your business agreements and contracts and ensure that your rights are protected.