How one court case rewrote credit agreement boilerplate almost overnight
Highlights
- Citibank mistakenly wired Revlon's lenders roughly $900 million instead of an $7.8 million interest payment in 2020.
- A court initially ruled some lenders could keep the money under a 'discharge for value' defense, before an appeals court later reversed that decision.
- Erroneous payment clauses now appear in 88% of credit agreements, while liability management blockers barely reach 20% despite guarding against comparable financial damage.
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Why this clause went from rare to universal
By Dan Wertman, originally published on the Noetica blog, now part of Thomson Reuters. June 2025.
In college, I once Venmo’ed a friend $200 instead of $20 for an Uber ride–the result: pure panic.
Now multiply that panic by seven figures, and that’s roughly what Citibank felt a few years ago.
Syndicated loan agreement
These Standard Clauses are based on the model provisions developed by the Loan Syndications and Trading Association (LSTA) and adapted for the Canadian market.
See the exact Revlon clause language ↗
The $900 million mistake
In 2020, Citibank, acting as administrative agent for Revlon’s lenders, accidentally wired the full outstanding loan balance rather than just the interest payment due — about $900 million instead of roughly $7.8 million. Some lenders refused to return the difference, arguing the payment was valid under a legal doctrine called “discharge for value.”
A federal court initially agreed, leaving Citibank out roughly $500 million. An appeals court later reversed that ruling. But by then, the market had already moved: “Revlon clause” erroneous payment provisions began appearing in credit agreements within weeks of the original decision, well before the reversal was even decided.
Why this clause went from rare to universal
Noetica’s Q1 2025 Capital Markets Radar found erroneous payment terms — which require lenders to return mistakenly sent funds — in a staggering 88% of deals. That’s not a recent spike, either: the term appeared in 87% of relevant publicly filed deals in Q3 2023 and 85% in Q3 2024, showing the market settled into near-universal adoption within a couple of years of the original 2021 ruling and has stayed there ever since.
It’s worth noting how sharply this departs from ordinary consumer norms. If a fast-food order accidentally comes with an extra item, the accepted rule in American retail is that the mistake is the company’s cost to bear, not the customer’s to fix. Credit markets reversed that logic entirely: lenders don’t get to keep the benefit of an accident the way consumers do, and erroneous payment clauses exist specifically to codify that reversal in writing rather than leave it to a court to decide again.
The reason is simple: fat-finger errors aren’t theoretical, they’re inevitable, and when billions of dollars move through a single wire, market participants don’t want ambiguity about what happens if it goes wrong. By comparison, liability management blockers — which protect against comparable financial damage from a different kind of risk — barely crack 20% of deals. Credit markets have made their priorities clear: clever financial engineering is an interesting problem to negotiate over; a wrong decimal place on a wire transfer is treated as an existential threat that gets addressed in nearly every deal.
That priority hasn’t shifted since. Noetica’s Q3 2025 Capital Markets Radar confirms erroneous payment clauses remain near-universal, right alongside sacred rights protections like pro rata sharing and lien subordination.
For more deal-term benchmarking like this, explore the latest Capital Markets Radar Report from Noetica, now part of Thomson Reuters.
