Comfort Letters - Let the Issuer Be Aware!
Comfort letters are controversial. They are usually the result of a compromise. The issuer, while wishing to ensure that the recipient will participate in the implementation of the underlying transaction (commonly a loan to a subsidiary of the issuer), seeks to avoid legal liability. The recipient, however, seeks as much assurance as it can get that the underlying transaction will be performed. So, what are the legal consequences arising from this compromise? This article challenges the assumption that an issuer faces either contractual liability as if it had given a guarantee, or no contractual liability at all. It is suggested that, while an issuer may successfully avoid giving a guarantee, the undertaking may nevertheless give rise to some contractual liability.
Publisher: Thomson Reuters
Keywords: Banking and Finance Law; Contract Law; Contractual Liability
Research Type: Journal Article