Drafting and issuing term sheets or commitment letters

2 minute read
19 September 2016
If you are involved in the drafting and issuing of commitment letters and term sheets there have been important changes. We highlight the implications of these changes and the key things to consider when drafting and issuing commitment letters and term sheets.

Be Aware

The recent case of Novus Aviation Ltd v Alubaf Arab International Bank BSC(c) [Bank BSC(c) [2016] EWHC 1575 (Comm), has considered whether a Bank could withdraw from a transaction after having entered into a commitment letter that said that its financing was dependant on satisfactory review and completion of documents for a plane purchase, lease and financing. One the effects of the commitment letter was to bind the bank to provide funding unless it had decided in good faith that the documentation prepared for the transaction was not satisfactory.

Before You Go

When entering into commitment letters or term sheets consider:

  • how committed you wish to be to the terms stated in them;
  • whether to insert appropriate carve out language and/or amendment rights if you require the discretion to revisit terms or withdraw from proceeding further with your transaction in the future; and
  • that a court may look at discussions and documents used or entered into, as part of the pre-transaction planning stage when looking at whether or the not the parties intended to take a transaction forward to completion.

If you have any queries or concerns arising from any of the matters discussed in this bulletin, please contact Stephan Smoktunowicz.

NOT LEGAL ADVICE. Information made available on this website in any form is for information purposes only. It is not, and should not be taken as, legal advice. You should not rely on, or take or fail to take any action based upon this information. Never disregard professional legal advice or delay in seeking legal advice because of something you have read on this website. Gowling WLG professionals will be pleased to discuss resolutions to specific legal concerns you may have.

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