Apart from being divided (supposedly) by a common language, the laws of the UK and the US take a different approach to the recharacterisation of contracts. In particular, it is said that the UK takes a formal approach, while the US adopts the functional approach. Typically, the question arises when the true character of a financing agreement falls to be determined: assuming it matters, is the transaction one which creates an absolute interest (e.g. by way of sale) or one which is less than absolute (e.g. a security interest)? But what does it mean to adopt a functional, as opposed to a formal, approach in this context?
In this article, Weil lawyers Mark Lawford, Peter Isakoff, Alinta Kemeny, Elisabeth Sperle and Patrick Steel, together with Mark Arnold QC of South Square, explore that distinction.
This article first appeared in South Square Digest, October 2018, and is republished with the permission of South Square.
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