A recent decision of the UK Commercial Court sounds a cautionary note to parties entering into pre-contractual deal documents on the assumption that they do not constitute legally binding obligations. In Novus Aviation Limited v. Alubaf Arab International Bank BSC (c) [2016] EWHC 1575 (Comm), a commitment letter signed by one party only was held to constitute a binding contract and funding obligations that were conditional upon a further review of full transaction documents were enforceable against a bank. Financial institutions and lessors should take note and ensure that preliminary documentation is expressly caveated to avoid being held to the terms of a letter of intent or term sheet.
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