¶ … damages is whether or not there is a contract that has been breached. Under Texas law, a plaintiff must be establish four elements in order to prevail on a breach of contract clam. The four elements are: 1) the existence of a valid contract; 2) performance or tendered performance by the plaintiff; 3) breach of the contract by the defendant; and 4) damages sustained by the plaintiff as a result of the breach (Valero Mkfg. & Supply Co. v. Kalama Int'l. LLC).
The best evidence available for the plaintiff in establishing a possible breach of contract action is the loan commitment letter issued on March 31, 2005. The letter in question sets forth all the terms and conditions but, unfortunately, it also included a new term of which the plaintiffs were not aware. Additionally, the bank's employee, Max Brandt, assured the plaintiffs that compliance with the new term was not necessary and that the loan would still be available. The plaintiffs apparently relied upon this assurance and went forward with this assurance in hand.
The loan commitment letter which forms the basis of the instance case is an indispensable part of every loan agreement. The commitment letter is, in essence, a contract in which the lender promises to make a loan if certain conditions are met. As evidenced by the facts in the instant case, the parties to the commitment letter rely upon the conditions of the commitment letter to determine their future action. In this regard, the plaintiffs, upon being advised of the condition that the State of Texas, Economic Development Program, had to guarantee the loan took immediate steps to clarify this matter and, having been assured by Brandt that this condition was of no real concern moved forward with their purchase of Pace. Quite simply, the plaintiffs detrimentally relied upon Brandt's representation.
Before addressing the issue of the plaintiffs' detrimental reliance, there is a more preliminary matter that must be addressed. The plaintiffs' purchase of the Pace business was a two step process. The first process involved the actual purchase of the business' assets and the second process was the procuring of a loan that would allow the business the necessary working capital to operate. In the first process, the plaintiffs made an application for a loan to purchase the business. Said loan was within the granting authority of the bank's employee, Max Brandt, and, therefore, did not require loan committee approval. Although the parties may have been aware at the time of the $250,000 loan that an additional $750,000 was needed, there is no indication that Brandt represented to the plaintiffs that there was any guarantee that such loan was a certainty. Nevertheless, the plaintiffs went forward with the purchase of the business with the original $250,000 loan. By doing so, there is a strong argument that they did so at their own peril. This action by the plaintiffs will have significant impact on the plaintiffs' ultimate claim for damages regarding their argument that the Bank breached on the loan agreement.
The application procedure for the $750,000 needed for operating capital was a protracted one and filled with a variety of technical problems. The plaintiffs went to considerable time and expense to prepare their business for loan approval including the formation of an entirely new corporation. The plaintiffs did so, however, without any guaranteed assurance from any bank representative that their loan application was assured. Brandt did advise the plaintiffs that the bank would help the plaintiffs in their attempt to procure such financing.
The first item of dispute arises from the Bank having notified the plaintiffs of their approval for the $750,000 loan. This approval was done by almost immediately by the Bank and the plaintiffs were notified of the approval but were not in receipt of a formal letter of commitment. Upon receipt of the official letter of commitment the plaintiffs were advised of the condition that prior approval of...
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