Cases - Kleinwort Benson v Malaysia Mining Corporation

Record details

Name

Kleinwort Benson v Malaysia Mining Corporation

Date

[1989]

Citation

1 WLR 379, CA

Keywords

Contract – letter of intent - intention to create legal relations – certainty – whether comfort letter sufficient to oblige company's policy to ensure subsidiary's liabilities would be met

Summary

A subsidiary of the Malaysia Mining Corporation (MMC) was seeking a loan from Kleinwort Benson, for which Kleinwort Benson sought a comfort letter from MMC. MMC wrote to Kleinwort Benson stating that it was its policy to ensure that the business of the subsidiary was at all times in a position to meet its liabilities to Kleinwort Benson under the loan facility arrangements. The subsidiary subsequently defaulted on the loan repayments and Kleinwort Benson sought recovery from MMC under the terms of the comfort letter. Although the first instance judge drew attention to the presumption in business matters that agreements are intended to create legal relations, the Court of Appeal held that letters of comfort are statements of present fact and not contractual promises as to future conduct.

his case is important, because it demonstrates that comfort letters between businesses need not always create a legally binding relationship. It also provides further demonstration of the uncertainties that can arise under letters of intent as to contractual obligations.