Question

Contractor performed considerable work on a project. Owner then became insolvent, leaving Contractor unpaid. Contractor tried to recover payment from the undisbursedconstruction loan proceeds being held by Owner's bank. Contractractor argued that it was a beneficiary of the loan agreement between bank and Owner. Bank refused to make payment.

Discussion

Do you agree with the Contractor's argument? Does the bank have any contractual obligation to disburse the unused loan to the contractor? How would you prevent this kind of financial risk?

Answer 1