For example, this type of plan is best suited to a company that prepays more than one loan. Suppose this company has three operational loans with different interest rates. The company makes capital and interest payments for the most expensive loan and pays only interest for the remaining two. Once the most expensive loan is repaid, the company can pay all interest and capital payments for the most expensive loan. The process will continue until all loans are repaid. Section 9.7, point a), of the water-of-payment case, was intended to give priority to the reimbursement of expenses, fees and expenses incurred by the representative of the facility in the exercise of this role of lender representative. It was economically wise for the facility representative to recover these costs, fees and expenses as a priority for the lenders, without subsidizing them, since he was acting as the lenders` representative, and they had committed to compensate them elsewhere in the facility agreement. For example, suppose John has three credit cards: the A card, the B card and the C card. Interest rates for cards are 20%, 12% and 10% respectively. John wants to withdraw from the credit card debt, so he decides to pay the highest interest card first.
Minimum monthly payments on cards are $150, $100 and $75. John pays for the waterfalls. First, he pays the minimum on each card ($325 in total) each month, then sends the A card an additional $800. When the A card is finally paid, it cuts it out and applies the additional $800 per month, plus the monthly payment of $150 that he used to send it to the A card ($950 in total) on the B card. When the B card is paid, John will use the $800 in additional payments, plus the minimum payment of $250 he used for the A and B cards ($1,050 in total) to Card C until it is paid. Mr. Justice Flaux rejected the proposition that a facility agent could never assume responsibility for the break costs under a warranty contract. In any event, he found that in long-term commercial contracts, there would often be words or phrases that were superfluous or had no obvious meaning.
While the court will attempt to avoid a construction that could render an entire clause insignificant or ineffective, it will recognize the clear and obvious meaning of a clause despite the addition of a contingent or superfluous language. On the other hand, the complainant banks argued that the facilities agreement clearly distinated the different capabilities and roles of the facility officer, the security officer, the security lender and the lender, although BLB performed all of these tasks at the time of the agreement. The complainant banks also submitted that the construction of clause 9.7 a by BLB would include BLB as a lender and that BLB, as a lender, would have priority over other lenders, which is inconsistent with the other sub-clauses in item 9.7.