The Promise That Outlives the Deal: A Discipline for Giving and Releasing Undertakings

In commercial practice, the document everyone remembers is the one that was signed. The sentence that causes the most difficulty is often the one written in an email at ten past six, offered to unblock a completion, and never revisited once the pressure eased. It may not use the word 'undertaking'. It may not be countersigned, or even acknowledged. It is nonetheless a promise, and promises of this kind have a way of outliving the transaction they were designed to rescue.

A promise, not a courtesy

An undertaking is a statement, made by a person or firm with apparent authority, that they will do something or refrain from doing something, offered in circumstances where the recipient is entitled to rely on it. The label matters less than the substance. A commitment expressed as reassurance, given to a counterparty, a landlord, a regulator or a court, can bind just as firmly as one drafted by counsel.

The consequences vary with the recipient, and each is serious in its own way. An undertaking given to a court, including the ones extracted during urgent applications or offered as the price of an injunction, is enforceable through the court's contempt jurisdiction; breach can lead to committal. An undertaking given to a commercial counterparty is generally enforceable as a contractual promise, and where the giver is an officer of the court, the court's supervisory jurisdiction sits behind it. For solicitors and regulated firms the position is sharper still: the SRA Standards and Regulations require that undertakings given by a practice are performed within an agreed timescale, or within a reasonable time where none has been agreed.

The common thread is that an undertaking carries weight independent of the underlying deal. If the transaction collapses, the undertaking usually does not.

Where they quietly accumulate

Most undertakings are not labelled as such. They surface in conveyancing, where solicitors undertake to discharge charges, hold title documents to order or remit completion monies. They appear in landlord and tenant work, where an occupier promises to reinstate or to fund works by a fixed date. They arise in planning and in negotiations with local authorities, in settlements with HMRC, in discussions with regulators, and in litigation, where parties promise to preserve documents or to deliver up property. Directors give them in the disqualification context; parent companies give them to support a subsidiary's obligations; project managers give them to contractors on a Friday afternoon because a payment run depends on it.

Individually, each looks modest. Collectively, they form a shadow balance sheet of obligations that no one has reconciled, because no one was asked to.

Authority before assurance

The most valuable control is also the simplest: decide who may give an undertaking at all. In too many organisations the answer is effectively anyone with a telephone and a sense of urgency. Fee earners without supervisory sign-off, credit controllers, site managers and directors of trading subsidiaries frequently lack the authority to bind the entity they are writing for, and rarely pause to check.

A workable rule is that no undertaking is given without a named approver who is satisfied on three points. First, that the entity has both the power and the capacity to perform. Second, that performance lies within its own control rather than in the hands of a third party. Third, that the wording is precise enough that a stranger reading it in two years' time would know exactly what was promised and by when.

Drafting discipline follows from the second point. Formulations such as 'we will procure', 'we will ensure' or 'we will use best endeavours to guarantee' are frequently offered precisely because the outcome is uncertain. Courts read ambiguous undertakings strictly, and an assurance hedged by a condition the giver cannot control offers far less protection than the giver imagines. If something genuinely sits outside your control, say so expressly in the operative sentence rather than in a covering note.

Recording, and the discipline of the register

Undertakings that are not written down in one place are, for practical purposes, not managed. A register need not be elaborate. For each entry, record the date, the giver, the recipient, the terms verbatim, the trigger event, the deadline, the internal owner and the mechanism by which the obligation will be released. Verbatim matters: paraphrase loses the very words that will later be argued over.

Two further points repay attention. Distinguish corporate undertakings from personal ones, because a director who has given an undertaking in his or her own name has taken on a liability the company does not share. And record undertakings that have been given inadvertently, in correspondence, so that they can be either honoured deliberately or corrected quickly while correction is still possible.

Delegation and the problem of the letterhead

Obligations arrive through agents as well as employees. Outsourced property managers, managing agents, contractors and billing providers all correspond on somebody's letterhead and all occasionally promise things. Terms of engagement should state plainly who may commit the organisation and who may not, and should require immediate notification of anything resembling an undertaking. Where third parties hold themselves out, the correction should be made in writing and without delay, since silence in the face of a promise is rarely read as dissent.

Closing out, formally

Undertakings end in one of three ways: performance, release, or expiry. Each deserves a file note.

Release should come in writing from the party to whom the promise was made, and should identify the undertaking precisely. Silence is not release, and a warm closing email at the end of a transaction is not a discharge. Time-limited undertakings need a diary entry set well before the deadline rather than on it, because the final week is when negotiation is least effective. Where an undertaking has been performed, record the evidence of performance and close the register entry, so that the file reflects reality rather than the hope that nothing will be raised.

When one is called in and the terms no longer look generous

The first step is retrieval, not reply. Obtain the exact wording, establish who gave it and with what authority, and check whether it has already been performed or superseded. Then assess whether the promise is clear and unambiguous, whether the recipient has done what was required of them, and whether there is a genuine dispute about scope rather than merely about appetite.

Resist the temptation to repudiate the whole obligation. A partial, evidenced position, acknowledging what is owed and explaining what is contested, preserves credibility and negotiating room. The available routes are usually to perform, to agree a written variation, or to seek release. A variation is itself a promise, so it must be documented with the same care as the original.

Where the undertaking was given to a court, the court retains a discretion to release or vary it, and will weigh changed circumstances against any prejudice to the beneficiary. That application should be made before the deadline, not after. Where the undertaking was given by a regulated firm, breach carries regulatory as well as civil exposure, and early advice is invariably cheaper than late explanation. Above all, avoid informal assurances in correspondence that could themselves be read as fresh undertakings at the very moment the original is under strain.

A short governance checklist

• Name the individuals entitled to give undertakings, and state the limit of their authority.
• Require a second pair of eyes on the operative wording, not the covering note.
• Keep a single register, with the words used recorded verbatim.
• Diarise deadlines and review entries at every transaction close.
• Obtain written releases, and close entries with evidence of performance.
• Report open undertakings to the board or management committee at least annually.

An undertaking is credit extended in words. Firms that extend credit carefully, and collect it deliberately, tend to find that their word remains worth exactly what they intended.

This article is general information and does not constitute legal advice. McGoff & Byrne advises businesses and professional firms in Leeds and London on the giving, management and enforcement of undertakings.