At your discretion

04 June 2012

Commercial contracts may confer on one contracting party the discretion to take decisions that have an impact on the interests of the other party to the contract.

This can give rise to questions of whether the decision maker owes any duties to the other contracting party and the extent to which the decision maker is entitled to prefer their own interests.

This issue arose in the recent case of v Skandinaviska Enskilda Banken AB where the court had to consider, among other things, whether the defendant (a clearing broker) owed the claimant (an investment fund) a duty to conduct a close out liquidation of the claimant's portfolio of assets with reasonable skill and care, following a failure by the claimant to comply with its contractual obligation to make margin payments.

Source: The In-House Lawyer