Posted By: | December 04, 2020 |

Bindingness and Implications of ‘Pre-Agreements’ - Letters of Intent, Memoranda of Understanding, Term Sheets and Heads of Agreement

In an ideal world, parties to a contract are expected to finalise their business dealings and sign a written agreement before performance of the contract begins. The general nature of a contract is that parties negotiate terms and conditions of their proposed transaction, and draw up a formal contract expressing rights, obligations and relationship of the parties prior to performance. However, in reality, parties are sometimes under commercial pressure to “get the show on the road” or commence work as soon as possible. As such Letter of Intent (“LOI”), Memorandum of Understanding (“MOU”), Term Sheets (“TS”) and Heads of Agreement (“HOA”) are preliminary documents ('pre- agreements’ or ‘agreements to agree’) commonly used by parties to document their expectations regarding potential negotiation outcomes pending the completion of a final contract.

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