Contract Termination, Integrity Risks, Human Rights, and the Environment

Abstract Banks and other financial institutions are not completely free when it comes to terminating contracts. First, they sometimes have a statutory obligation to terminate contracts with customers and other counterparties on account of integrity risks and also on account of human rights violations and environmental damage (duties of termination). In such cases, what the financial institution itself wants is no longer relevant. Even if the financial institution itself does not wish to terminate a contract, it is still obliged to do so by law. Equally, cases occur in which a financial institution wishes to terminate a contract, often because of integrity risks, but the civil courts rule that this is not permitted, at least not as a matter of course, even where the financial institution has a contractual right of termination and there is no specific statutory provision precluding termination. In both cases, the freedom to terminate a contract is restricted. This chapter discusses these restrictions on the freedom of contract of banks and other financial institutions.