Publications

October 26, 2009

Author: W. Christopher Barrier
Source: Vol. 44 No. 4/Fall 2009 The Arkansas Lawyer

Penalties on the diamond, gridiron, court or rink are intended to discourage undesirable behavior, from delay of the game to spearing with a hockey stick. In the legal context, penalties of various kinds may have that same purpose, but they can also serve to compensate for losses. They are not favored by the courts and, hence, they may be enforceable or not, depending on which purpose is ascribed to them by the judicial referee.

In a period of rising rates of loan default, especially loans secured by real estate, lenders do not often have the luxury of worrying about collecting the penalties represented by late fees or legal fees or pondering legal theory. However, because these fees can become an issue in workouts and takeouts and lenders, borrowers and especially lawyers need to know the rules before they take the field. Crosstraining in other areas can also provide useful conditioning.

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