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Is A Letter Of Intent An Agreement

This case shows the importance of ensuring that all the terms of the proposed contract are included in a document before work begins and costs and liability are created. Lord Clark commented: „The moral of the story is to accept first and start working later.“ Despite the useful judgment of the Supreme Court, statements of intent do not provide a complete safety net for incomplete documentation. Parties often consider a statement of intent that defines the core of the transaction, a practical and easy-to-grasp document to assess in advance the general pros and cons of the transaction and achieve a broad business understanding that is enjoyable to all. Therefore, in cases where a declaration of intent is concluded and should not be binding, it should be ensured that the Memorandum of Understanding clearly states that it does not create a contractually binding relationship between them. Nor should the parties react to the declaration of intent (or start work in accordance with it), as if they had a legally binding agreement to avoid possible disputes in the future. Financiers who do not have a fully signed facility agreement, but who have a signed letter of offer and manage an establishment for an alleged client, will be interested to learn that the Supreme Court recently ruled that a memorandum of understanding could be interpreted as binding if it is very similar to a formal contract or if it results in the parties intending to: to consider them as such.