What if the parties had signed a Memorandum of Understanding? Does it make a difference? Clients often ask us if the directors of terms or statements of intent that they have already agreed with another party are binding. At the end of the day, the question is what was agreed upon, what the intentions of the parties were and whether the conditions are sufficiently secure to be legally applicable. Finally, the intention of the parties should be that the provision of the negotiation should be merely an agreement or a negotiation agreement, that it depends on the language chosen by the parties in the negotiating provision and not on a prima facie position that applies to all bargaining provisions. It is certainly possible to design this provision in such a way that it is nothing more than a negotiating agreement. However, it can also be designed so that there is a positive obligation to respect certain parameters and to undertake a number of steps in good faith in the negotiations. In the construction industry, conceptual heads are often packaged as letters of intent or short letters of intent or “LOis.” A terminology different from the same meaning. This was illustrated in the recent case of RTS Flexible Systems against Molkerei Alois Muller GmbH [2008]. In this case, the High Court found that a letter of intent by RTS and Muller, which did not explicitly state whether their terms were to be binding, constituted a legally binding contract between the parties. The Tribunal found that the terms and conditions and language used meant that the Memorandum of Understanding was sufficiently secure and comprehensive to obtain contractual force. A letter itself is not legally binding and does not replace a full legal contract. None of the parties are retained on the content. In this way, she and your potential partner can be assured that you will continue with a common understanding of what a potential contract entails.

The advantage is that potential differences and even “deal killers” are eliminated early, so none of you waste time if your basic goals are so different that you`ll probably never reach an agreement. One thing is clear: failure to comply with a negotiating provision will not result in a court giving “agreement” to the parties. It is such an abomination to the common law traditions that no common law tribunal would adopt such an approach and a bargaining provision will never be interpreted by a court as a promise of the parties that they will reach an agreement. A Memorandum of Understanding for a commercial proposal, the terms of a partnership agreement or a joint venture could be mentioned: declarations of intent can be a useful business tool. They allow the parties to resolve the essential issues and to confirm in writing the main conditions agreed so far.