Here's another lesson in making sure your contracts are written as tightly as possible: The Tennessee Court of Appeals has ruled that First Citizens National Bank is not liable for the fact that a home construction project in Eads, Tenn., ran over budget. The future homeowners had sued the lender after their loan proceeds ran out, saying First Citizens had a duty to inspect the progress. In his opinion, Judge Frank Highers noted that a clause in the parties' contract imposed a limited duty on the bank to monitor the disbursement of its loan, but that the agreement as a whole included no broad obligation to keep the project on track.

The agreement’s “conditions precedent” were obligations of the Bookers in order to be entitled to disbursements; they were not obligations of the Bank in order to be permitted to disburse funds. As such, the Bank had no contractual duty to complete inspections, for the benefit of the Bookers or otherwise.