Q&As

Can you change the terms of a facility agreement over the phone or by email, or do you need an amendment agreement?

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Produced in partnership with Albert Sampson
Published on LexisPSL on 25/07/2017

The following Banking & Finance Q&A produced in partnership with Albert Sampson provides comprehensive and up to date legal information covering:

  • Can you change the terms of a facility agreement over the phone or by email, or do you need an amendment agreement?
  • Summary
  • Variation—the usual position
  • Contractual terms imposing formalities for variation
  • Drafting a variation agreement
  • Variations and guarantees and security
  • Unilateral variations
  • Conclusion and practical points

Can you change the terms of a facility agreement over the phone or by email, or do you need an amendment agreement?

STOP PRESS: On 16 May 2018 in the case of Rock Advertising Ltd v MWB Business Exchange Centres Ltd [2018] UKSC 24, the Supreme Court unanimously held that licence fee payments under a licence agreement containing a ‘no oral modification’ clause could not be varied by oral agreement between representatives of the licensor and licensee. The decision has been described as giving real meaning and support to no oral modification clauses within contracts. The guidance below should now be read subject to this recent Supreme Court case. In addition see: LNB News 16/05/2018 112.

Summary

The short answer is that, in general, a written amendment agreement is not needed to change the terms of a facility agreement, although there must be a legally binding agreement (whether oral, in an informal written document or by conduct) to vary the facility agreement.

In the context of banking and finance, the most common variations are likely to be to the time for repayment, the covenants included in the facility (eg LTV ratios or negative pledges in relation to the borrower’s assets), or the provisions applicable to interest payable by the borrower. This Q&A addresses some of the recent developments in this area, and the common pitfalls that can arise.

Variation—the

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