UK: A Pressing Commitment

Last Updated: 10 August 2016
Article by 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.


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 in an upcoming transaction for the purchase of new Airbus 330-300 aircraft to be delivered to Malaysia Airlines. The purchase was to be funded by way of equity and debt finance such that the Bank would provide the majority of the equity financing (approximately USD 40,000,000) and Novus would arrange the debt financing (approximately USD 70,000,000) (the "Transaction"). On 5 May 2013 the investment committee of the Bank approved the Bank's entry into the Transaction. Later the same day, Novus sent a draft commitment letter to the Bank. Following discussions between Novus and the Bank, some minor amendments were made to the letter and the Bank sent Novus a scanned copy of the executed commitment letter. Given the structure of the Transaction, further steps were taken, including the incorporation of various special purpose companies, the opening of bank accounts, nomination of directors and the like. By 19 May 2013, law firms had been instructed to produce draft Transaction documentation. By early June, however, the Bank became aware that the structure of the Transaction was likely to prove problematic. Under international accounting rules the accounts of the special purpose companies would be consolidated with the accounts of the Bank such that USD 70,000,000 of debt finance would be a liability of the Bank whilst the acquired aircraft would be regarded as an asset of the Bank. For various other reasons, from the Bank's perspective, this was an insuperable barrier. By 17 June 2013 the Bank's board resolved to reject a proposal to continue with the Transaction. On 25 June 2013 – following conversations from 18 June 2013 when Novus was told of the board's decision – Novus's solicitors wrote to the Bank requesting an undertaking that the Bank would abide by the terms of the commitment letter (failing which proceedings would be initiated). Solicitors for the Bank responded three days later stating that there was no binding agreement between the Bank and Novus and that the Bank did not intend to proceed with the Transaction. Consequently, the Transaction aborted and Malaysia Airlines purchased the aircraft themselves. Novus sued the Bank for breach of contract. One of the questions for the court (the others are not discussed here) was whether the commitment letter was intended to be legally binding. Importantly, although the Bank had signed and returned the commitment letter, there was no evidence that Novus had signed the commitment letter.

The outcome

Mr Justice Leggatt held that the commitment letter was legally binding. In particular, whilst there was no evidence that Novus had signed the commitment letter, binding legal relations had arisen between it and the Bank viewing both the conduct between the parties and the terms in which the letter was expressed. In other words, when determining the existence or non-existence of enforceable contractual relations the court will not, in the absence of clear language to the contrary, limit itself to communication in words only to the exclusion of the parties' conduct. As to the words used in the letter, the judge thought that the language employed in the letter (and the jurisdiction provision in particular) dispelled any doubt about intention to create legal relations: the use of the formulation "the agreement constituted by acceptance of its terms", mandatory language such as "shall" and the 'quintessential' language of legal obligation, "covenant". The judge acknowledged that in principle it is possible to create a document some parts of which are to be legally enforceable and others which are not. Nonetheless, as an aside, he added that one would expect to see the "distinction between the two qualitatively different types of provision clearly signalled".

Practical steps

If a party wishes to enter a document to signal intent but not to be legally bound by that document (including, for example, term sheets, memorandum of understanding, commitment letters and the like) it will have to demonstrate that intention not to be legally bound very clearly as this case demonstrates. From a practical perspective, documents ought:

  • to state that they are not intended to create legal relations (and/or they are subject to contract) if that is what the parties seek;
  • to be drafted so that they prescribe that the only mode of acceptance is by signature and countersignature to avoid the situation in this case; and
  • to state, if adopting the approach in the above bullet, that such prescribed mode of acceptance can only be waived in writing to avoid that requirement being waived by words or conduct.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

In association with
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.