Legal Status of Comfort Letters in South Africa Essay

Legal Status of Comfort Letters in South Africa - Essay ExampleAccording to the draw in the Kleinworth Benson case, the court said that in order to determine whether the blow letter created an enforceable obligation on the part of the maker or issuer, profound construction of the words or language used in the babys dummy letter should be made. If the words or language strongly suggest that the console letter is promissory in nature which is evident on the face of the letter itself, the maker or issuer is obliged to perform an obligation under the comfort letter. In this case, the court held that the comfort letter is not enforceable because the terms only represented it was the practice of the company to provide financial support and with no indication in the letter that the policy would continue in the future.From this paper it is clear thatif the maker or issuer does not intend to be binded by the comfort letter, he or she must include a disclaimer or a clear statement on the face of the letter that he or she does not intend to give rise to any legal obligation whatsoever. Otherwise, in the absence of the disclaimer, the comfort letter is intended to be legally enforceable. This see somehow was utilized by a court in deciding a case in 2002 when it held that the plaintiffs reliance on the comfort letters was unwarranted because the disclaimer language expressly stated that they were not to be used, circulated, quoted, or otherwise referred to for any purpose, including but not limited of the purchase or change of securities.