Exercising discretion rationally

BHL v LEUMI [2017]

This is a useful example of how contractual parties should exercise discretion in contracts. The Court found that a lender had not behaved rationally when exercising its contractual discretion to impose certain fees so it had to refund the fees charged which were considered to be excessive.


“If [L] requires the Client to repurchase any Receivables and the Client fails to do so within 7 days of such demand, [L] will be entitled to charge the Client an additional collection fee at up to 15% of amounts collected by [L] thereafter. This collection fee is in addition to any other fee payable by the Client to [L] under this Agreement. The Client expressly acknowledges that such fee constitutes a fair and reasonable pre-estimate of [L]’s likely costs and expenses in providing such service to the Client”.


The Court commented on these issues as follows:

Points to note:

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