The Law Society has, today, issued a Banking Crisis Practice Note.
The note is brief, but includes comment on the giving and accepting of undertakings in light of the banking crisis. It reminds lawyers that: “If you have made any express undertakings to pay money, you must honour this even if the bank has collapsed…You should not attempt to limit the extent of your liability to honour undertakings.”
However, slightly contradicting itself, the note says: “Some solicitors have asked whether they can offer qualified undertakings. Solicitors are free to negotiate the terms of their undertakings, where this is in the best interests of clients. However, in residential conveyancing transactions, it is highly unlikely that buyers’ solicitors could properly accept offers of a limited undertaking in their clients’ best interest. Also, offering such an undertaking may breach the obligations of sellers’ solicitors to their clients, depending on the terms of their retainer.”
Clearly, as a recipient of an undertaking, you cannot accept an undertaking that has been qualified to cater for a bank collapse.