Massachusetts Agencies

Dragnet Clauses


The cases that will shed light on dragnet clauses are Financial Acceptance Corp. v. Garvey 6 Mass.App.Ct. 610, 380 N.E.2d 1332 (1978) and Everett Credit Union v. Allied Ambulance Services, Inc. 12 Mass.App.Ct. 343, 424 N.E.2d 1142 (1981).  The thrust of these cases is that (i) a dragnet clause will generally be enforced where the subsequent loan or advance to be secured by it is of the same general nature as the original disbursement, (ii) such clauses are always enforceable against the borrow and (ii) subsequent lienors are also bound by these clauses and the priority of such subsequent liens will yield to them, at least where the lienors have knowledge of the facts.