Get Comfort Contract

Consequently, while a guarantee would be a legal binding commitment which can be enforced against the guarantor in the same manner as against the borrower, a letter of comfort is a mere moral obligation on the provider where chances of enforceability being minimum.

A comfort letter confirms that a business's CRA program accounts are in good standing. It is most commonly requested by financial institutions (lending institutions) and lawyers. For example, a bank could request a comfort letter from the CRA for a business before granting a loan.

Comfort letters are statements from an issuer's auditor that the auditor reviewed the issuer's financial data and assures its accuracy. In public offerings, underwriters generally request comfort letters to establish a due diligence defense to avoid liability for securities fraud.

Distinct from their legally binding counterpart – the guarantee – letters of comfort are designed to give assurance or encouragement only, imposing moral, but not legal, obligations on their issuer.

Letters of comfort are generally used when the holding company is unable or unwilling to give a guarantee, but wishes to give some comfort (to the recipient of the letter) as to its subsidiary's ability to satisfy its contractual obligations.

Although the letter of comfort is not binding between the two parties, it may have binding provisions. The letter of comfort provides an opportunity for the two parties to clearly spell out these binding provisions.

A letter of comfort, sometimes called a "letter of intent", is a communication from a party to a contract to the other party that indicates an initial willingness to enter into a contractual obligation absent the elements of a legally enforceable contract.

The comfort letter can be issued by a Certified Public Accountant declaring no indication of false or misleading information in the financial statements and that the company's prospectus follows the prevailing accounting standards. This is sometimes used in connection with an initial public offering.

The comfort letter does not make a legally enforceable commitment but conveys the ability of the other party to fulfill the terms of the agreement under discussion. A comfort letter is also known as a letter of intent or, in some cases, a solvency opinion.