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ARTICLE · 10 AUGUST 2016

A Pressing Commitment

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A recent High Court decision illustrates the potential perils for parties entering into what might be assumed (or at least appear) to be documents that are not legally binding.

United KingdomCorporate/Commercial Law
Lisa Harrison
Lisa Harrison

A recent High Court decision illustrates the potential perils for parties entering into what might be assumed (or at least appear) to be documents that are not legally binding. In Novus Aviation Limited v. Alubaf Arab International Bank BSC(c) [2016] EWHC 1575 (Comm) it was held that a commitment letter signed by one party but not the other party was an enforceable contract such that the defendant's withdrawal from its terms constituted an anticipatory – and costly – breach of contract. This note summarises the facts of the case, the outcome and practical steps that can be taken to reduce the risk of documents expressed to be not legally binding being found to be so.

Facts

In March 2013, Alubaf Arab International Bank BSC(c) (the "Bank") contacted Novus Aviation Limited ("Novus"). Novus's business consists of arranging finance for the acquisition and subsequent leasing of commercial aircraft. Novus and the Bank entered discussions and the Bank expressed interest

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