Meeting the Challenges Covid-19 Poses for Trade Finance Transactions: Key Issues to Consider When Making Amendments and Waivers

Client Alert
September 2, 2020

This article is the second in a series looking at how to address some of the issues affecting trade finance documentation and transactions in the current climate.

The first article in this series analysed some of the issues that parties to a trade finance transaction should be aware of when considering amendments and waivers to their written contracts. This article continues to explore the issues that arise in connection with amendments and waivers, focusing first on the common question of how best to document an agreed amendment or waiver to an English law contract, and then considering how amendments or waivers to one contract can potentially (and possibly detrimentally) impact a party’s rights under a connected contract, and finally how to take steps to avoid or mitigate such impact.

How should I document an amendment or waiver in a trade finance transaction?

The starting point is always to consider any requirements set out in the relevant contract. Even if a contract is silent as to how it should be amended or waived, it is advisable to make any amendment or waiver in writing as, if well drafted, doing so helps to mitigate any later dispute about the intended scope or effect of the amendment or waiver.

There may also be certain scenarios in which an amendment must be in writing in order to comply with a statutory requirement. For example, in general terms, the Statute of Frauds 1677 requires that any guarantee governed by English law be in writing. As such, if a contract (such as a facility agreement) is to be amended to include a guarantee, then there will need to be written evidence of that amendment setting out the terms of that guarantee. An amendment to a security document may also need to be in writing if the amendment triggers a requirement to register or stamp that security document in any jurisdiction (although amendments to security documents should as a general rule always be in writing anyway).

A contract may specify exactly what is meant by a document (including any document making an amendment or waiver) being “in writing”. If this is the case, the parties should ensure they follow those contractual specifications. However, in the absence of such a provision, the English courts have taken a broad view of what constitutes “in writing”. This has been held to include fax and email. Using email to effect amendments or waivers can be operationally helpful as well as time and cost effective. However, parties need to keep in mind that an amendment or waiver made by email can have the same legal effect as an amendment or waiver made by way of an amendment agreement and should be given the same level of care and attention.

Where the parties choose or are required to document their amendment or waivers more formally (or in what is perceived to be a more formal manner), this is usually done by an amendment or waiver letter or agreement or an amendment and restatement agreement. There is no set rule as to when an amendment agreement or an amendment and restatement agreement should be used. This decision is usually driven by how extensive the proposed amendments are, with an amendment and restatement agreement often being the better approach where there are significant amendments to be made.

Using an amendment and restatement agreement is also helpful where the underlying contract has already been amended a number of times (whether by email, amendment agreement or otherwise) and the parties want to consolidate all of the changes into one updated agreement.

Any written amendment or waiver will also need to be signed. This can cause its own practical issues in the current climate which has given rise to an increase in the use of virtual signings. The issues with, and practicalities of, virtual signings have been considered by Geoffrey Wynne and Fiona Luong:

The impact of amendments or waivers on associated agreements

Many trade finance transactions will have an extensive suite of documentation relating to that transaction. This will typically involve some or all of: the underlying commercial contracts being financed, the financing agreement, one or more security documents, guarantees (personal and/or corporate), insurance and other forms of credit support, such as, participation agreements.

The interaction between the various agreements relating to a transaction means that an amendment or waiver to one agreement can impact on the rights and obligations of the parties to another agreement within the suite of transaction documents. We explore some common examples below.


A core principle of the English law of guarantees is that the liability of the guarantor is contingent on the underlying guaranteed obligations. If amendments are made to the underlying obligations, there is a risk that this could unintentionally discharge or reduce the liability of the guarantor. This may be the case even if the guarantor was aware of the relevant amendments at the time they were being made.

To try and protect against this, English law guarantees will typically try and ‘future proof’ themselves by including provisions whereby the guarantor consents to future amendments of the guaranteed obligations and confirms that the guarantee covers the guaranteed obligations as amended from time to time. This is often supplemented by the guarantor giving an express waiver in the guarantee of any defences it may have in connection with the guarantee, including any defences that might otherwise arise following any amendment of the guaranteed obligations.

However, English law is generally viewed as being protective of guarantors and the efficacy of such provisions will need to be determined on the basis of the particular facts and circumstances. In light of this, it is always advisable to obtain written confirmation from the guarantor that it consents to the proposed amendments to the guaranteed obligations and that the guarantee will continue to cover the guaranteed obligations once amended.

It is important to be aware of the distinction between amendments that amend the existing guaranteed obligations and those that create wholly new obligations. For example, an amendment to a loan agreement that introduces a new tranche or facility may be treated as creating new obligations that do not fall within the scope of the guarantee. In this situation, the primary concern is not that the amendments will affect the guarantor’s obligations under the guarantee but rather whether the guarantee will cover the new obligations.

Again, a written confirmation from the guarantor that it consents to the proposed amendments and that the guarantee will cover the guaranteed obligations (including the new tranche or facility) once amended will put the beneficiary of the guarantee in a much stronger position.

Security documents

A security document regulates the terms on which one or more parties (the Security Providers) grant security to one or more persons (the Beneficiaries) over assets of the Security Providers in connection with obligations owed to the Beneficiaries. The obligations in question may be owed by the Security Providers (for example, where the Security Providers are providing security for their obligations under a loan agreement, often referred to as ‘first party security’) or may be owed by a third party (for example, where the Security Providers are parent or sister companies providing security for the obligations of another group company under a loan agreement, often referred to as ‘third party security’).

Any amendments or waivers that impact on the scope or nature of, or the terms applying to, the secured obligations have the potential to impact on the security granted by the Security Providers. For example, if the loan agreement is amended so that the amount of the loan facility is increased, the interest rate is increased or the final repayment date is extended, the Beneficiaries will want to ensure that the security covers the increased amounts or will continue in force during the extended repayment period.

As with guarantees, a well drafted security document will typically try and ‘future-proof’ against changes to the secured obligations after the date that such security document comes into force. However, there are always risks with trying to rely on such wording, particularly where the changes are substantive, and this gives rise to the potential for disputes as to whether or not the amended obligations are covered by the terms of the security document.

This is particularly the case where the security is ‘third party security’. As with guarantors, English law is protective of third party security providers and additional caution should be exercised when making changes to obligations that are subject to third party security. Regardless of whether security is first party or third party security, it is advisable to obtaining written confirmation from the Security Providers that they consent to the proposed amendments to the secured obligations and that the security will continue to cover the secured obligations once amended.

Again, be aware of the distinction between amendments that amend the existing secured obligations and those that create wholly new obligations. New obligations may require amendments to the existing security agreement or even require a new security agreement be entered into. Both of these scenarios can give rise to the usual issues around taking of security, such as, hardening periods, priority and perfection steps (such as stamping and registration).


Insurance policies often contain provisions requiring the insured to notify the insurers of the occurrence of certain events or circumstances and to agree certain actions with the insurers before they are taken. In particular, many non-payment insurance policies include a warranty that states that the insured will not make amendments (sometimes limited to material amendments) to the insured agreement without obtaining the written consent of the insurers.

Warranties in an insurance policy need to be treated extremely seriously as they require exact compliance. If the breach of warranty is capable of remedy, failure to comply with a warranty can mean that the insurers will have no liability for loss during the period the insured is in breach of the warranty. If it is not, insurers can argue that they have no further liability under the policy.  A warranty of the nature set out above may in theory be unproblematic where the insured is the sole finance party under the insured agreement and is therefore able to control whether or not amendments or waivers are made. However, this requires the insured to make sure that anyone with responsibility for the underlying transaction is aware of the warranty in the insurance policy and understands the potential risks of inadvertently agreeing to amendments or waivers (as discussed in the first article in this series).

The position can be more complicated where the insured is not the sole finance party under the insured agreement and the risk arises that the insured may not be able to dictate whether or not amendments or waivers are made. A prudent insured should make sure that the terms of its policy reflect this possibility and that the warranty (or any other relevant provision) is limited accordingly. Given the importance of compliance with warranties, legal advice should be sought if there is any uncertainty about the applicability of a warranty to any given set of facts and circumstances.


Amendments and waivers are a common occurrence for trade finance transactions and often reflect the developing nature of transactions and party relationships. However, the routine nature of many amendments and waivers should not detract from understanding the legal effect of every amendment and waiver or from considering the possible impact on the wider transaction. Taking time to consider these issues, including seeking legal advice where needed, before proceeding with an amendment or waiver can ultimately save significant time and cost if any dispute should later arise.

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