Commercial Law — Financial law — Commercial sureties — Comfort letters

Date Citation Note
26.02.2002 Com 484 Pourvoi 99-10.729 JCP E n° 24 13.06.02 Case Sofiber v. Banque Populaire de Bretagne “Comfort letters” are often agreed between financiers and shareholders of the company being financed. They are usually intended to give some form of moral comfort to the financier about the way the borrower will be managed, but without involving the shareholder in any form of legal liability or any obligation likely to impact on its balance sheet. Their negotiation and drafting are delicate, since the giver is aiming at an absence of real meaning, while the recipient is aiming at the opposite. In France where corporate guarantees need specific board resolutions if they are to be enforceable, the position is even more complicated.
This case concerns a letter given by a parent company in respect of banking facilities given to its subsidiary. The letter stated that the parent would do what was necessary in order that Loiseau (the subsidiary) may have sufficient funds to meet its obligations towards the bank.
This letter created an obligation to produce a given result (“obligation de résultat”) – i.e. to fund sufficiently the subsidiary, and could therefore be enforced, even though it is therefore a kind of guarantee and there was no proof of the existence of board approval