## Facts

- Great Lakes and European Lines, Inc. (GLE), an international shipping company, borrowed money from Continental Illinois National Bank and Trust Company of Chicago; Fred and Helen Sahadi owned GLE and personally guaranteed the loans.
- The bank initially extended a $3 million loan (1976) and later increased its loan commitment to $11 million (1977), but disputes arose after the bank allegedly repudiated the increased commitment.
- In October 1977, the parties negotiated a restructuring/forbearance arrangement to address the dispute.
- The bank agreed to forbear from demanding repayment until December 31, 1977, conditioned on GLE paying all accrued interest by November 15, 1977.
- The Sahadis provided additional collateral and released the bank from claims arising out of the disputed loan commitment.
- The bank had previously accepted late interest payments from GLE under earlier arrangements.
- GLE tendered the interest payment on November 16, 1977, less than one day late.
- The bank refused the tender and immediately accelerated/called approximately a $7 million outstanding loan, allegedly destroying GLE’s business and exposing the Sahadis to liability on their guarantee.
- The Sahadis sued individually and as assignees of the bankruptcy trustee’s claims, alleging the bank breached the forbearance agreement by accelerating after the slight delay.

## Issues

1. Whether, under Illinois law, GLE’s one-day-late interest tender was a material breach that entitled the bank to terminate forbearance and accelerate the loan as a matter of law.
2. Whether the bank’s prior acceptance of late payments created a triable issue of waiver or modification of strict punctuality, including whether notice was required before insisting on exact timeliness.
3. Whether the bank’s refusal of the next-day tender and immediate acceleration without notice presented a triable issue of lack of good faith under the UCC and common law.
4. Whether the district court properly granted partial summary judgment on breach despite disputed material facts.

## Decision

- The Seventh Circuit reversed the district court’s partial summary judgment for the bank and remanded for trial.
- The court held that there was at least a genuine dispute of material fact on whether the one-day delay was a material breach.
- The court concluded that related questions concerning waiver by course of performance and good faith also could not be resolved on summary judgment on the existing record.

## Legal Principles

- Under Illinois contract law, materiality of breach is generally a fact question requiring consideration of the parties’ objectives and the practical significance of the alleged default.
- A minor delay in payment, even when a date is stated, does not automatically establish a material breach justifying acceleration as a matter of law.
- A course of performance, including prior acceptance of late payments, can support a finding of waiver or modification of strict compliance, and may bear on whether notice is required before enforcing punctuality.
- The obligation of good faith under the UCC and common law can constrain a lender’s exercise of contractual remedies where evidence supports an inference of action inconsistent with prior dealings.
- Summary judgment is improper when reasonable inferences from the record create genuine disputes of material fact; the evidence must be viewed in the nonmovant’s favor.

## Conclusion

The Seventh Circuit held that the bank was not entitled to summary judgment on its claim that a one-day-late interest payment justified immediate acceleration, because a factfinder could reasonably dispute the materiality of the delay and could also find waiver by prior dealings and lack of good faith, requiring a trial.


Sahadi v. Continental Ill. Nat’l Bank & Tr. Co. of Chi., 706 F.2d 193 (7th Cir. 1983)