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The Court of Appeal has released a decision stating that the common law duty of honest contractual performance does not necessarily require a lender to lend new money.
A bank has a duty to give a customer reasonable notice of a change in the prevailing course of conduct with respect to overdraft lending, but that does not mean that the bank is obliged to loan new money. The reasonable notice duty is distinct from a bank's more commonly litigated but separate duty to give reasonable notice before calling for repayment of a demand loan.
The recognized duty of "honest contractual performance": (i) does not require a party to forego advantages flowing from the contract; (ii) does not create commercial uncertainty in the law of contract; (iii) does not impose a general duty on a contracting party to subordinate his or her interest to that of the other party, and in the circumstances of the case, (iv) did not require the bank to advance new money during the notice period.
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