Article
Drafting and issuing term sheets or commitment letters
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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.
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