A key issue for the courts when deciding on the legal status of a Essay

A key issue for the courts when deciding on the legal status of a rest garner is whether or not the party proffering the comfort letter intended to create legal transaction - Essay ExampleComfort garner are common in loan agreements, as an alternate(a) from asking the lender to obtain a guarantor for the loan. In order for a claimant to be up to(p) to rely on the letter of comfort as a control of payment, the claimant has to prove that the person exit the letter intended to create legal relations between themselves and the claimant.According to Ellinger (1989) comfort earn fire be identified into 3 specific types, and can include undertakings from a parent company to collect the financial commitments of the subsidiary company. Less stringent comfort letters identify that the parent company knows of the pattern of the subsidiary company to enter into a contract with the other party, but makes no express secure to honour the agreement of the subsidiary or to actively inter vene to ensure that the subsidiary company fulfils the contract.These letters can have legal effect despite the fact that they cannot be relied upon as a guarantee that the party will fulfil their part of the contract. One of the first cases to consider the effect of comfort letters was Banque Brussels Lambert S A v Australian National Industries Ltd1 in which the defendant averred that the letter should not be regarded as a binding contract. In this case, the bank insisted on a letter of comfort as a condition of the loan agreement between the parties. The bank had originally act to force the defendant to guarantee the payments on the loan, which the defendant had refused to do. The claimant attempted to aver that the letter of comfort contained promissory paragraphs with regard to the conduct of the defendant and that the defendant had breached these promises. One such paragraph statedWe take this chance to confirm that it is our practice to ensure that our affiliate the borrowe r will at all times be in a position to meet its financial obligations as they fall due. These