Letter of Intent: Unilateral Commitment and Obligation

Extract

[...] The other party had opposed this request, producing for this purpose a letter of intent from its parent company in which it confirmed that it would maintain its financial support to its subsidiary, as it had always done, even in the event of a judgment being overturned by an appellate jurisdiction. After the first president had rejected its request for suspension of provisional execution, the guarantor company denounced its commitment, ceded its participation in its subsidiary and appealed the judgment of condemnation. The appellate court overturned the judgment and condemned the subsidiary to repay the ?800,000, which, due to its judicial liquidation, proved to be impossible for it to do. [...]

[...] Judging the parent company liable for the disputed sum, it refutes the thesis of its appeal on the grounds that "by analyzing the scope of the letter of intent and seeking the common intention of the parties, taking into account the judicial context in which it was produced, the court of appeal held that the (guarantor) company had undertaken to support the (debtor) company so that it could repay the (creditor) company the sum of ?800,000, in the event of a future decision on the merits of the dispute overturning the first instance judgment, thus showing that it had committed to such a result". I. The letter of intent: the birth of an obligation The letter of intent is a unilateral commitment that is recognized by the law A. A unilateral commitment Question long debated regarding the letter of intent: can a unilateral commitment, without encountering another will, give birth to an obligation? Can one create a debt towards oneself and thus grant a claim to another? [...]

[...] It is the same for the qualification for the commitment to ensure the entirety of the financial needs of the subsidiary by current account contribution. (On 17 May 2011 and 24 October 2000) On the other hand, the letter in which the company takes the commitment to ensure that its subsidiary has sufficient treasury or that the commitments are met only creates an obligation of means. (Com Oct and Com March 1991). B. The characterization of an obligation of result In the commented judgment, it is noted that the joint intention of the parties to the contract, which is assessed in the context of the current case law that tells us that the letter was produced and that the parent company guaranteed its subsidiary so that it could return the amount in question in the event of non-confirmation of the judgment, is indeed an obligation of result. [...]

[...] The appellate court granted this request. The guarantor company filed an appeal, invoking the distortion of the letter. It argued in particular that the passage of the letter relating to the confirmation of the support provided to its subsidiary, in which "even if, extraordinarily, the Paris Court of Appeal should overturn the judgment ( . obliging this company to repay ( . ) the sum of ?800,000", characterized a simple obligation to act, excluding any "monetary" obligation." A parent company that sends a letter of intent to its subsidiary to confirm its financial support, in the event that the latter is condemned on appeal to repay to a creditor the amount of damages awarded to it by the parent company in a first judgment, has it thus obligated itself to repay this amount? [...]

[...] The letter of intent: the qualification of the obligation In order to qualify the letter of intent as an obligation of result A. The search for a qualification When it is acknowledged that the letter of intent contains a genuine commitment, judges admit that it can go as far as the obligation to guarantee a result as provided by the jurisprudence of the commercial chamber of the Court of Cassation of December or remain a simple obligation of means. Thus, by expanding the contentious issues concerning the distinction between obligation of means and obligation of result in the matter of letter of intent, new criteria appear. [...]