Abstract
In the wake of the global financial crisis, borrowers found it increasingly challenging to obtain finance. Once credit had dried up, the pendulum swayed in favour of lenders during loan negotiations. In an effort to avoid and terminate unprofitable loan agreements, major banking institutions relied heavily on the punitive provisions that were set out in loan contracts, particularly the draconian material adverse change clause. Against this background, this paper analyses the material adverse change clause with particular reference to case law. It also examines defences that a borrower can seek to rely on in court, following the Turkish case of Cukurova Finance. The paper considers the doctrine of relief of forfeiture in the context of loan agreements and argues that it is a remedy a borrower should seek to raise in court. The doctrine permits a borrower to mitigate the severity of punitive clauses when an event of default is triggered.
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