Quistclose Trust

The concept of quistclose was introduced in English law through the decision held by the House of Lords in Barclays Bank v Quistclose Investments Ltd. Although this decision is from 1970, until now it has been a target of huge debate among scholars in relation to its legal nature. English courts have been applying the concept of quistclose in diverse situations without consensus over its elements. Among other characteristics quistclose trusts require the application of money to a specific purpose otherwise it requires the return of the money to its payer and not to a third party beneficiary. Scholars diverge over the legal nature of a quistclose trust and its applicability to commercial transactions. Despite general agreement over the legal nature of a quistclose its structure might be helpful in minimizing lender’s risk in project finance and in loan transactions with companies in finance distress.