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Court limits lender discretion under Material Adverse Change (MAC) clauses

equity bank branch

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The commercial division of the High Court of Uganda has ordered Equity Bank (U) Ltd to pay a school UGX 233,748,000/= in special and general damages with interest thereon.

And of course costs of the suit.

Lady Justice Patience T.E Rubagumya held that the bank had breached the contract contained in a loan facility agreement dated 21st February, 2020 (and varied on 19th March, 2020) to disburse UGX 17.8Bn to the school.

Relying on a Material Adverse Change (MAC) clause in the contract which stipulated that: “A material adverse change occurs, in the opinion of the Bank, in the financial condition, results of operations or business of the borrower” Equity Bank had terminated the contract on the ground that the Covid-19 pandemic had disrupted the education sector owing to school closures.

The bank also argued, in court, that:

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