Teachers Insurance & Annuity Association v. Ormesa Geothermal
United States District Court for the Southern District of New York
791 F. Supp. 401 (1991)
Ormesa Geothermal (defendant) needed financing for a multimillion-dollar power plant and negotiated a $25 million long-term loan with Teachers Insurance & Annuity Association (TIAA) (plaintiff), a sophisticated institutional lender. The parties agreed on all key financial terms, including the interest rate, and TIAA sent a signed letter describing itself as a "binding" commitment covering those financial terms, following the customary practice of leaving nonfinancial details to be worked out later. Ormesa countersigned and returned the letter, and TIAA began the process of releasing the funds. Before closing, interest rates fell, and Ormesa walked away from the deal to pursue cheaper financing elsewhere, prompting TIAA to sue for breach of contract.
Whether a signed loan commitment letter binds the parties to a loan even though it does not address every element of the anticipated transaction.