Case Facts Banque Brussesls Lambert SA v Australian National Industries Ltd (1989)
The Spedley Securities Ltd wanted to acquire a loan from Banque Brussels which amounts to $5 million.
In order to do so, Spedley must present an assurance that the loan will be paid. With this on hand, the mother company of Spedley, which is Australian National Industries (ANI), wrote a letter to Banque Brussels.
The content of the letter included an acknowledgment of the load acquired by Spedley, and that ANI consent such loan. Furthermore, ANI stated that the company will not lower down its shares in the company to 45 percent during the transaction.
Nonetheless, Banque Brussels is required to give a 90-day notice in order for ANI to dispose of their shares.
In addition, the letter also stated that once the notice has been served, the Banque Brussels will give a 30-day notice to ANI to settle the loan.
Also, an assurance was stated in the letter that ANI aims to secure Spedley to be capacitated to pay the loan it had acquired from Banque Brussels. However, during the term of the transaction, ANI sold its shares in Spedley without securing the notice to Banque Brussels.
With this on hand, this action hampered the financial capacity of Spedley to pay their loan.
Case Issue:
The issue of the case is whether or not the letter delivered by ANI to Banque Brussels was legally binding and enforceable because there is intention for the parties to enforce the contract.
Case Decision:
The court held that the letter was a legally binding contract for the security of the loan.
Case Significance:
Banque Brussels Lambert SA v Australian National Industries Ltd (1989) is important because it reflects that in the event that an agreement is carried out commercially, then the agreement is considered as legally binding.
Moreover, the promise in the letter is also enforceable as it contains specific promises.
Specifically, the promise includes hindrance to the reduction of ANI shares, that a 90-day notice must be served, and that a promise that ANI will secure the financial capacity of Spedley to pay its loan.
Read more about the case here.
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