Conclusive evidence clause

Any finance lawyer will be familiar with the following kind of clause:

In the absence of manifest error, a certificate from the Lender as to any amount due will be conclusive evidence of the amount owing.

Conclusive evidence clauses are meant to support indemnities. There’s a wealth of snarkily-presented information in indemnities in the usual place but the key point to remember is that, a well-crafted indemnity is meant to be a pre-agreement to pay an ascertainable sum of money: both parties are meant to have a fairly clear handle on what is required to be paid out.

Thus you will see that tell-tale caveat: “in the absence of manifest error”: where the sum claimed was obvious and not really in dispute; the bank did certify it but a fly got in the typewriter or some such thing and they put in the wrong number.

In the traditional banking world where lenders obtain indemnities from their borrowers and are discounting bills and so on this is straight forward. A banker ought to know how much he is owed, and how much interest, and there ought not to be a tedious back and forth with a mendacious defendant trying prolong the legal battle about it. That only benefits one person, as we all know, O dear attorney.

Now, these days indemnities are thrown around willy nilly by all kinds of moron in the capital markets business, to cover all kinds of inappropriately indeterminate things. It will not shock me if I see an indemnity claimed for “any and all losses, costs, damages, liabilities, disbursements, expenses claims of whatever kind we may experience at any time merely as a function of drawing a breath”.

I mean, go for your life. Good luck enforcing that. And, really, good luck trying to stick in a clause saying “In the absence of manifest error, a certificate from the Lender as to any such “Loss” will be conclusive evidence of the amount owing.” and getting anyone to agree it or, if they do, a court to pay it any attention.

See also

• Indemnity
• Manifest error