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10 Denial of Legally Binding Effect

Michael Furmston, G J Tolhurst, Eliza Mik

From: Contract Formation: Law and Practice (2nd Edition)

Michael Furmston, Gregory Tolhurst

From: Oxford Legal Research Library (http://olrl.ouplaw.com). (c) Oxford University Press, 2022. All Rights Reserved.date: 25 September 2022

Construction of contract — Formation of contract — Interpretation of contract — Performance of contract — Validity of contract

An agreement is legally enforceable only if it is supported by valuable consideration and there is an intention to contract. This chapter focuses on this requirement of an intention to contract which must exist in all the parties. It discusses the use of presumptions; the presumptions and threshold intention; consideration and intention to contract; family and social agreements; and commercial agreements. The final section deals with letters of comfort. When a bank is approached for finance by a subsidiary of a large company, any initial offer of finance usually will be subject to security being provided by the parent company. Where the parent company is not prepared to provide security, it may provide the bank with a letter of comfort. These letters take three principal forms. The first type acknowledges the subsidiary's loan application and states that it is the policy of the parent company to ensure that its subsidiaries meet their loan obligations. The second type acknowledges the subsidiary's loan application and states that it intends to maintain its shareholding in the subsidiary. The third type simply acknowledges the loan application.

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