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Heads of agreement in commercial matter

Heads of agreement in commercial matter

Regular price $60.00
Introductory note This precedent is a heads of agreement in a franchising matter. It is intended to be contractually binding in part, see clause 15. The documents should be executed in accordance with the constituent documents of the parent company. Letters of comfort Letters of comfort are letters typically issued to a financier by the parent company of a prospective borrowing entity and are not intended to create legal obligations. They are given when the parent company does not wish to enter into a legally binding arrangement, such as a guarantee, but is willing to make reassuring statements to the lender on a non-binding basis. They are also used as a way of reassuring directors and auditors of subsidiary companies, in cases where subsidiary companies depend on funding from the rest of the group. In such cases, although less formal than a guarantee, they are almost certainly enforceable. Whether the content of a particular letter of comfort is found to give rise to legally enforceable obligations depends partly on the context in which the letter is given and partly on the contents of the letter. Aside from the surrounding circumstances, other factors that may indicate an intention to be legally bound include: • the use of legal or formal language; • extensive negotiations leading to the letter (this being inconsistent with an ex gratia gesture of goodwill, which is what the giver of the letter would like it characterised as); and • the inclusion of standard clauses such as a choice of law clause, which point to the letter being more in the nature of a contract. Letters of comfort tend to be short as the idea is to say as little as possible and contain short paragraphs which tend to be one of the following: • statements of fact; • statements of current intention or policy; or