Austrian OGH Defines Direct Payment Duty in Comfort Letters

Sept 26, 2025 Benn-Ibler Rechtsanwälte

In a recent decision, the Austrian Supreme Court (Oberster Gerichtshof, hereinafter OGH) established that a ‘hard’ comfort letter may allow the lender to assert a direct claim against the guarantor if the borrower becomes insolvent.

In the case at hand, the defendant held roles as both co-partner and managing director of a limited liability company (GmbH) that operated a business account with the plaintiff, resulting in a negative balance. On 14 April 2023, the defendant signed a letter of comfort, committing to provide the GmbH with at least EUR 40,000 in capital should the company fail to fulfil its payment obligations to the bank. Following the initiation of bankruptcy proceedings against the company’s assets, a claim amounting to EUR 57,064.20 remained unsettled, which was subsequently filed and acknowledged during the insolvency process.

The OGH has provided clarification that comfort letters may carry varying degrees of legal binding effect. Typically, they are intended to enhance a company’s credit standing and offer assurance to lenders. ‘Soft’ comfort letters include non-binding commitments of support, whereas ‘hard’ comfort letters set out explicit obligations for the guarantor to supply funds. In the latter case, the guarantor is required to furnish the company with adequate capital to ensure it can fulfil its payment obligations to the lender.

In the case at hand, the OGH classified the defendant’s letter as a 'hard' letter of comfort, as it expressly guaranteed a minimum capital contribution of EUR 40,000. The insolvency of the limited liability company prevented fulfillment of this obligation, enabling the bank to pursue a direct claim for damages against the guarantor. This claim seeks to restore the lender to the financial position it would have occupied had the guarantor supplied the required capital, thereby encompassing the full outstanding amount of EUR 57,064.20.

This decision highlights the significant financial implications associated with ‘hard’ comfort letters, as they extend beyond simple statements of intent and may result in direct payment obligations for the guarantor in the event of insolvency.

1 Ob 45/25m (31 July 2025)