Commercial Law, 2016 Bar — Question XVIII-A

ESSAY

B Bank, a large universal bank, regularly extends revolving credit lines to business establishments under what it terms as socially responsible banking and private business partnership relations. All loans that are extended to clients have a common “Escalation Clause,” to wit: “B Bank hereby reserves its right to make successive increases in interest rates in accordance with the bank's adopted policies as approved by the Monetary Board; Provided that each successive increase shall be with the written assent of the depositor.” X, a regular client of the bank, contends that the “Escalation Clause” is unfair, unconscionable and contrary to law, morals, public policy and customs. Rule on the issue and explain.

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