Default Notices: time to remedy

[New_Age_Biker]

Re: Default Notices: time to remedy

Following your argument
If the agreement was terminated prior to a (faulty) DN being issued, but without the notice period required by the terms of the agreement, the claimant would lose the right to enforce via the courts. However the debt would remain.
If the DN was issued first, again faulty, and the debtor accepted. The OC would lose the right to enforce by the court but the debt would remain. The arrears would be claimable though.
Do you agree?

[Guest]

Re: Default Notices: time to remedy

Following your argument
If the agreement was terminated prior to a (faulty) DN being issued, but without the notice period required by the terms of the agreement, the claimant would lose the right to enforce via the courts. However the debt would remain.
If the DN was issued first, again faulty, and the debtor accepted. The OC would lose the right to enforce by the court but the debt would remain. The arrears would be claimable though.
Do you agree?

Hi

Yes nearly what i mean.

However the creditor terminated the agreement prior to default the contract would be no longer active in the eyes of the cca, if they terminated outside the terms of the agreement there would be no recourse under the cca because there is nothing said in it about termination of this kind there may be an actionable breach in contract law dont know.

TO me if the default termination was issued on a faulty notice then the termiation would not be valid, so the creditor would be free just to issue a corrected one and then terminate .

Section 87 does say something like creditor may not terminate.

My opinion only

Peterr

[Shepherdess]

Re: Default Notices: time to remedy

Once the creditor has given written confirmation of termination, or demanded rights not due to him because the dn was invalid, he is nontheless legally bound by his written statement. The debtor has every right to take him at his word.

To quote from "Contract Law in Perspective"

"If the innocent party (ie the Creditor) gets it wrong and purports to terminate in circumstances where, as a matter of law, it was not entitled to do so, the party in breach (ie the debtor) may be able to treat such wrongful termination as a basis on which he (the debtor) can legitimately terminate the contract"
and..
"where an ineffective termination by the innocent party (creditor) enables the defaulting party to terminate, the end result (termination of the contract) is clearly the same. However, there may be very serious financial consequences for the innocent party. If the party in breach is struggling to meet its obligations, or can only do so on an uneconomic basis, it might like nothing better than for the innocent party to terminate in circumstances where it is not entitled to do so. Not only will the defaulting party have escaped future performance under the contract, but it may also have a claim for damages against the innocent party for wrongful termination. Even the opportunity for the defaulting party to raise such an argument will enhance its position in any subsequent negotiations for settlement which may take place"

With regard to issuing another DN if they realise the original is faulty, common sense tells us that they can only do so BEFORE they terminate or demand the full balance etc. After that point the above applies.
Furthermore, one must look to the very wording of the DN to understand it's nature, in that if the requested action is performed, the breach is rectified and it will be as if the breach had not occurred.
Once the creditor terminates the agreement/demands the full balance not yet due, then he loses the ability to restore the agreement to as it was before the breach occurred. To do so he would have to have the agreement of the other party to reinstate the contract, and retract the demand for full payment. Anyone had that happen to them?

Just my thoughts :ranger:

[New_Age_Biker]

Re: Default Notices: time to remedy

Thanks for the input, PB & Sheperdess.
It would appear to be a difference of opinion as to the legality of terminating with a faulty Dn.
By requesting full payment or issuing proceedings surely the creditors actions indicate he has terminated the right to repay in installments - one of the major benifits of the contract to the debtor- I am certain that the ability to draw further credit would also be stopped. Therefore the debtor has no advantage in the contract whatsoever, it must be terminated.
Therefore the argument of enduring contract must surely fail?

It then follows that if the contract has not been terminated in accordance with the CCA the benifit to the creditor to request sums not yet due under the agreement must also be removed. As the agreement would have been a regulated agreement both sides must surely be bound by the benifits and penalties of the CCA.
This being the case, the only possible recourse is under contract law. But as the required notice period as per the contract was not given the ability to use the courts to enforce must be removed also.
IMO

[basa48]

Re: Default Notices: time to remedy

Hi well this is the thing the situaltion you give where the creditor terminates the agreement without a default he cannot pursue the debtor for early payment of the loan, for that he would have to have issued a default notice, the argument is that he would not be able to do that because the agreement was terminated.

this is why a none default termination will always (i suspect be just a termination of debtors rights to draw further credit).

Peter

I considering the termination by a creditor of a running account credit agreement in a non-default situation. Most (if not all) terms and conditions attached to running account credit agreements include a clause stating, “We may end this agreement at any time” or words to that effect.

As we know the Consumer Credit Act is silent on terminating non-default running account credit agreements and the debtor gains no relief there. So where does that leave the debtor who has been served notice of termination in these circumstances.

The Unfair Terms Regs may give relief if you can prove such a clause is an unfair term under 5(1) and Schedule 2(1)(o) “obliging the consumer to fulfill all his obligations where the seller or supplier does not perform his;”

However, as I understand the Regs, where a clause is declared unfair the law requires that, if the agreement can endure the voiding of such a clause, then the agreement continues without it.

How this affects an agreement that has already been terminated under such a clause is anyone’s guess at the moment. It is possible the agreement would be reinstated, thus giving the creditor an opportunity to then simply restrict the line of credit whilst the debt balance remains intact (i.e. repayable in installments). But what if the debtor has ceased payments arguing the agreement is ended and thus (in the eyes of the creditor) entered into default?

If the use of the UTCCRegs fails we may be left with Contract or Common Law remedies.

Is a termination in this manner a Breach of Contract, in particular an Anticipatory Breach?

Creditors will argue they have a right to terminate a contract at any time and that they are not obliged to offer unrestricted access to credit facilities. I don’t see why not, should the law not consider a creditor a permanently enduring organisation compared to the limited endurance of a debtor? Unless there is mutual agreement or a default by the debtor there is no good reason to terminate a credit agreement.

In contract law, where a party unequivocally evinces an intention that they will not perform executory consideration when performance falls due under a contract, the party will be in anticipatory breach of contract. At this point in time, the innocent party may elect to accept the renunciation of the contract, terminate it and sue for damages for the anticipatory breach. No further performance is required under the contract by the innocent party.

In cases where the renunciation is accepted, it is the renunciation that constitutes the cause of action, and not the future breach.

It is thus argued the contract is ended and the claimant is not entitled to tender performance at a later date and claim under the contract, as it has already been terminated. Equally no further performance is required under the contract by the defendant.

The recent Court of Appeal decision of Stocznia Gdynia SA v Gearbulk Holdings Ltd [2009] considered whether a contractual termination clause excludes the common law right to treat the contract as discharged and the right to seek damages.

This case confirms that the starting position is that a contractual termination clause, however detailed, will not exclude an innocent party’s common law right to treat a contract as discharged and seek damages, following a sufficiently serious breach. Typically, the circumstances in which termination is permitted under the contract will be regarded as events that the parties have decided correspond with breaches that the common law would recognise as giving rise to similar rights.

[Guest]

Re: Default Notices: time to remedy

I considering the termination by a creditor of a running account credit agreement in a non-default situation. Most (if not all) terms and conditions attached to running account credit agreements include a clause stating, “We may end this agreement at any time” or words to that effect.

As we know the Consumer Credit Act is silent on terminating non-default running account credit agreements and the debtor gains no relief there. So where does that leave the debtor who has been served notice of termination in these circumstances.

The Unfair Terms Regs may give relief if you can prove such a clause is an unfair term under 5(1) and Schedule 2(1)(o) “obliging the consumer to fulfill all his obligations where the seller or supplier does not perform his;”

However, as I understand the Regs, where a clause is declared unfair the law requires that, if the agreement can endure the voiding of such a clause, then the agreement continues without it.

How this affects an agreement that has already been terminated under such a clause is anyone’s guess at the moment. It is possible the agreement would be reinstated, thus giving the creditor an opportunity to then simply restrict the line of credit whilst the debt balance remains intact (i.e. repayable in installments). But what if the debtor has ceased payments arguing the agreement is ended and thus (in the eyes of the creditor) entered into default?

If the use of the UTCCRegs fails we may be left with Contract or Common Law remedies.

Is a termination in this manner a Breach of Contract, in particular an Anticipatory Breach?

Creditors will argue they have a right to terminate a contract at any time and that they are not obliged to offer unrestricted access to credit facilities. I don’t see why not, should the law not consider a creditor a permanently enduring organisation compared to the limited endurance of a debtor? Unless there is mutual agreement or a default by the debtor there is no good reason to terminate a credit agreement.

HI

Really an eternal contract?
I liker to swap my credit cards whenaever Martin Lewis tells me to i would hate to have to await the permission of the creditor to terminate my account and what is source for the goose surely

Peter

[paulb2905]

Re: Default Notices: time to remedy

Its an interesting discussion going on but i think the point your all missing is summed up here - not sure exactly where i picked it up from

[1] Termination of a Contract and General Principles
A good place to start would be to dispel the myth that the law will not tolerate contract breaking. On the contrary whilst not actively encouraging it, the law will tolerate it. The courts will rarely impose upon one party an obligation to perform under a contract against its will, to do what it failed to do or redo what it tried and failed to do. Instead, what the law will do is on the one hand restrain the contract breaker from procuring the benefits it would have enjoyed had it fulfilled its contractual obligations and on the other, enable the injured party to recover damages flowing from the breach.

In*Golden Strait Corporation v Nippon Yusen Kubishka Kaisha*[2007], Lord Bingham said:

'The repudiation of a contract by one party ("the repudiator"), if accepted by the other ("the injured party"), brings the contract to an end and releases both parties from their primary obligations under the contract. The injured party is thereupon entitled to recover damages against the repudiator to compensate him for such financial loss as the repudiator's breach has caused him to suffer. This is elementary law.

The damages recoverable by the injured party are such sum as will put him in the same financial position as if the contract had been performed.'

What's more, the law will not merrily award whatever loss the injured party says he suffered. The court will require the injured party to prove his loss and further, will expect the injured party to take steps to mitigate the loss.*

'An injured party such as the owners may not, generally speaking, recover damages against a repudiator such as the charterers for loss which he could reasonably have avoided by taking reasonable commercial steps to mitigate his loss.'*[Lord Bingham in Golden Strait Corporation.]

Further still, in assessing damages the law will not even award what the parties may at formation of the agreement have agreed should be payable as liquidated damages in the event of breach. The court will not permit the recovery of liquidated damages unless the damages represent a fair pre-estimate of what loss might flow from the breach. If the liquidated damages are shown to be excessive and unrepresentative of the sactual loss suffered the law will readily declare the liquidated damages as a penalty and unenforceable.

In short, not only does the law tolerate contract breaking, but also, it will not tolerate the injured party taking advantage of the wrongdoer. The law does not pounce on the contract breaker to teach him a lesson. The court only awards the innocent party what damages truly flow from the breach.

The clue to the position of the creditor on termination is in the use of the word 'entitled' in section 87(1). 'Entitled' connotes a right or a benefit. The Act therefore confers rights, conditional upon the provisions of section 87(1) being fulfilled. Fail to fulfil the condition and the entitlements do not become available.*

In the case of a contract entered into by a person under duress and who then breaks the contract the law will come to that person's aid by recognising that person's plea that the contract was made under duress. If that person seeks a declaration of the court that the contract was made under duress the court will readily declare the contract void.

If the Act had intended that a creditor's termination in circumstances where section 87(1) had not been fulfilled by the creditor and was to be of no effect, the Act would have declared that termination void. It doesn't. The termination is voidable at the option of the debtor.

[3] The Debtor's Point of View
Third, let us look at the position from the ordinary man as debtor's point of view in a consumer credit situation.*

The DN is defective for failing to conform to the prescribed terms, or gives misleading information or at worse is plain nonsense so that the debtor does not know precisely what he has to do in order to comply with it and is consequently disadvantaged. Should the law disregard the fact that the creditor put the debtor at a disadvantage and thereby at risk the creditor might lawfully terminate the agreement?*

'This statute was plainly enacted to protect consumers, most of whom are likely to be individuals. When contracting with a large financial organisation they are at a disadvantage. The contract is likely to be in standard form and relatively complex with a number of detailed provisions. If the hirer is said to have broken its terms, the hirer needs to know precisely what he or she is said to have done wrong and what he or she needs to do to put matters right. The lender has the ability and the resources to give that information with precision. If he does not do so accurately then he cannot take what Mr Gruffyd conveniently referred to as "the next step".*[per Kennedy LJ in Woodchester v Swayne [1998]]

Moving on, if the debtor receives a notice from the creditor in which the creditor expressly states the contract is terminated, what is the debtor supposed to think? Would the law regard him as likely to think the creditor had terminated the contract or would the law regard him as thinking it had not terminated because strictly speaking, the creditor had served a default notice which was not in accordance with prescribed terms?

Or where perhaps the creditor did not expresly terminate but sent the bully boys over to demand the keys to the car. What was the debtor to think then? Would the debtor think the creditor had terminated?

It seems to me on the basis of the passages below, the courts will be ready to hold a creditor to his words and actions.

"... a person who signs a document, and parts with it so that it may come into other hands, has a responsibility, that of the normal man of prudence, to take care what he signs, which if neglected, prevents him from denying his liability under the document according to its tenor".
[per Lord Wilberforce in*Gallie v Lee*(1971)]

'.. a man cannot escape from the consequences, as regards innocent third parties, of signing a document if, being a man of ordinary education and competence, he chooses to sign it without informing himself of its purport and effect..'
[per Scott LJ in*Norwich & Peterborough Building Society v Steed*(1992)]

In short, the creditor is bound by his deed. All that is required is for the debtor to accept the creditor's termination. He can write saying 'thank you I accept you termination' or he can conduct himself in a way in keeping with that termination. Not paying the instalments would be in keeping with an acceptance of the termination.

[TomThumb]

Re: Default Notices: time to remedy

[/U][/B]

HI

Really an eternal contract?
I liker to swap my credit cards whenaever Martin Lewis tells me to i would hate to have to await the permission of the creditor to terminate my account and what is source for the goose surely

Peter

Hmm did I miss the rename to the Creditor & Consumer Credit act 1974 then?

The Act is to PROTECT the debtor who is at a disadvantage when dealing with large creditors thus it laid more constraints and requirements on the creditor to protect the debtor.

An agreement under the act can be closed (currently at least(new regs)) by default or non-default, if non-default the creditor cannot ask for anything not currently due, if in default they can claim the lot.

So a non-default is the withdrawing of credit and agreeing that you can maintain your monthly repayments as I understand it.

Thats just my opinion

Tom

[Guest]

Re: Default Notices: time to remedy

Its an interesting discussion going on but i think the point your all missing is summed up here - not sure exactly where i picked it up from

Hi
Yes it is an excellant piece writen by surfaceageant in 2008 i think, unfortunately although the language is very elegant it is fundaentally flawed.at least i consumer credit terms.
You cannot accept a termination if you could you could decline it, and the creditor could not enforce. The idea tht the termiantion is a repudiation of the contract is false because as we have seen the contractural rights to termiate are usually there, so the idea of accepting the repudiation is not applicable.

In a commercial agreement when goods or services are being exchaged this is posible becuse usually there are no outstanding liabilities under the contract therefore the contractcan be rescinded,. In a loan arrangement there will always be a liability of the debtor to the creditor, the credior has rights the debtor has obligtions unfortunately.

Peter

[Guest]

Re: Default Notices: time to remedy

Hmm did I miss the rename to the Creditor & Consumer Credit act 1974 then?

The Act is to PROTECT the debtor who is at a disadvantage when dealing with large creditors thus it laid more constraints and requirements on the creditor to protect the debtor.

An agreement under the act can be closed (currently at least(new regs)) by default or non-default, if non-default the creditor cannot ask for anything not currently due, if in default they can claim the lot.

So a non-default is the withdrawing of credit and agreeing that you can maintain your monthly repayments as I understand it.

Thats just my opinion

Tom

This used to be my view also but the more i read the less sure i get.
If the creditor opts for using his contracturl rights to terminate the contrct then the contract is terminated. There is no difference in that ana termination under section 87 at least i cannot see one.
This means that none of the terms of the agrement apply so niether does the contractual right for the debtor to repay by installments.

I know this sounds wrong but where is the proof of any other conclusion please, dont quote the rights and wrongs of the situation that is irrelevant.

The facts are the creditor can demand repayment on a contractural termination he jusst cannot enforce that demand any more than he can enforce an IE agreement.

The thing that is forgotten is common law the commion law rights of the debtor still exist and they will not allow the crediotr to sue unless there is a breach.

Peter

[Guest]

Re: Default Notices: time to remedy

Hmm did I miss the rename to the Creditor & Consumer Credit act 1974 then?

The Act is to PROTECT the debtor who is at a disadvantage when dealing with large creditors thus it laid more constraints and requirements on the creditor to protect the debtor.

An agreement under the act can be closed (currently at least(new regs)) by default or non-default, if non-default the creditor cannot ask for anything not currently due, if in default they can claim the lot.

So a non-default is the withdrawing of credit and agreeing that you can maintain your monthly repayments as I understand it.

Thats just my opinion

Tom

I addition, re the new EU directive that comes into force in Feb next year, which i think is is being refferd to here. These ammendments actually itemise the differnt types of termination under contract as termiantion of right to draw credit and total contract termination.
Peter

[Lord_Alcohol]

Re: Default Notices: time to remedy

This used to be my view also but the more i read the less sure i get.
If the creditor opts for using his contracturl rights to terminate the contrct then the contract is terminated. There is no difference in that ana termination under section 87 at least i cannot see one.
This means that none of the terms of the agrement apply so niether does the contractual right for the debtor to repay by installments.

I know this sounds wrong but where is the proof of any other conclusion please, dont quote the rights and wrongs of the situation that is irrelevant.

The facts are the creditor can demand repayment on a contractural termination he jusst cannot enforce that demand any more than he can enforce an IE agreement.

The thing that is forgotten is common law the commion law rights of the debtor still exist and they will not allow the crediotr to sue unless there is a breach.

Peter

Hi Peter

The way I see it is that if the OC terminates on breach but his DN is defective then the debtor can accept or decline!

He can decline the OC's termination as being an error in law (ie, he had no right to terminate under s87(1)(a) because he had not complied with s88 beforehand). A reasonable OC would accept that and issue a compliant DN so that the debtor can properly remedy his breach.

Theferore the debtor can accept the termination instead.

However, we all know that lenders will probably not agree with this and that they will not rectify their original mistake unless ordered to by a court. But that disagreement is not necessarily relevant.

Clearly, monies due must be paid. But the Act indicates that the OC has waived his rights to unpaid mounts, at s87(1)(b). The only sums that can be considered, therefore, are the arrears and any costs that the debtor might incur for the OC's unlawful and unexpected termination.

Bear in mind that the OC cannot claim unpaid amounts where the agreement is terminated on breach and where a valid DN compliant with s88 has not been served. He cannot terminate either, but the reality is that he has!

LA

[Guest]

Re: Default Notices: time to remedy

Hi Peter

The way I see it is that if the OC terminates on breach but his DN is defective then the debtor can accept or decline!

He can decline the OC's termination as being an error in law (ie, he had no right to terminate under s87(1)(a) because he had not complied with s88 beforehand). A reasonable OC would accept that and issue a compliant DN so that the debtor can properly remedy his breach.

Theferore the debtor can accept the termination instead.

However, we all know that lenders will probably not agree with this and that they will not rectify their original mistake unless ordered to by a court. But that disagreement is not necessarily relevant.

Clearly, monies due must be paid. But the Act indicates that the OC has waived his rights to unpaid mounts, at s87(1)(b). The only sums that can be considered, therefore, are the arrears and any costs that the debtor might incur for the OC's unlawful and unexpected termination.

Bear in mind that the OC cannot claim unpaid amounts where the agreement is terminated on breach and where a valid DN compliant with s88 has not been served. He cannot terminate either, but the reality is that he has!

LA

Hi

Why would you think you can accept a termiantion, it is not a repudiation of the agreement.

I dont understnd what difference it makes that you say you accept it. The debtor can terminate at any time any way, it does not mean the liabilities under the contract dissapear, accepting the termination of the creditor if that where possible mearly means he is within his rights to sue for the full amount due under the contract by common law.

The fact is of coursr that you cannot accept it anyway because he is not entitlled to termiante on a defective dn.
The number of people on CAG that have followed this, accepting the termination nonsense is astounding and now of course we are seeing the results, the courts are just ignoring this and prossecuting all over the place, as they would it is nonesense.

Peter

[TomThumb]

Re: Default Notices: time to remedy

I addition, re the new EU directive that comes into force in Feb next year, which i think is is being refferd to here. These ammendments actually itemise the differnt types of termination under contract as termiantion of right to draw credit and total contract termination.
Peter

Yes, you are quite correct I was referring to the new rules brought in for the EU.

Tom

[Lord_Alcohol]

Re: Default Notices: time to remedy

Why would you think you can accept a termiantion, it is not a repudiation of the agreement.

But the OC has repudiated the contract! Hasn't he?

I dont understnd what difference it makes that you say you accept it. The debtor can terminate at any time any way, it does not mean the liabilities under the contract dissapear, accepting the termination of the creditor if that where possible mearly means he is within his rights to sue for the full amount due under the contract by common law.

Yes, agreed, but the debtor didn't want to terminate prior to the OC's wish to terminate. The debtor sees the OC's antics, receives his termination and accepts that it is the only way forward.

But...the OC appears to have waived his entitlement to unpaid amounts (s87(1)(b)) because he terminated on breach but without serving a valid DN.

No, you're right, liabilities do not disappear. However, those liabilities are the arrears, if s88 and s87(1)(b) are to be believed.

The fact is of coursr that you cannot accept it anyway because he is not entitlled to termiante on a defective dn.
The number of people on CAG that have followed this, accepting the termination nonsense is astounding and now of course we are seeing the results, the courts are just ignoring this and prossecuting all over the place, as they would it is nonesense.

Firstly, the OC does terminate! He is not entitled to, as you say, but he does anyway. That much is clear.

Secondly, what is the debtor supposed to do? The OC issues a DN that cannot be complied with due to its defects, terminates, and starts recovery actions or even court proceedings. The OC is supposed to "know what he is doing" and the debtor is "unsophisticated".

I fail to see why this is "nonesense".

You mention prosecutions where termination led to (presumably) resurrection of the agreement; do you have any references so we can see for ourselves?

LA