What Is A Letter Of Intent

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What Is A Letter Of Intent
What Is A Letter Of Intent

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Video: Business Law: What is a Letter of Intent? 2022, December
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Currently, legislation regulates a wide variety of areas of human activity, even those that will only develop in the future. For example, to settle a relationship and create guarantees for a future transaction, you can conclude a preliminary agreement or a letter of intent.

What is a letter of intent
What is a letter of intent

The concept of a contract of intent

It is not for nothing that a preliminary agreement or an agreement of intent bears such a name. Like other types of contracts, it entails the emergence of legal obligations for the parties concluding it. However, its subject is not the transfer of property, the performance of work or the provision of services, but the conclusion of another contract. Thus, the parties undertake to conclude in the future a specific loan agreement, supply, and so on, securing their commitment with a preliminary agreement. Such an agreement is usually drawn up in writing. He will be considered a prisoner only upon notarization or state registration.

Content of the contract

The document provides for special content. In the contract being drawn up, its essential conditions must be indicated. For example, a delivery contract must be accompanied by a description of the goods (with its name, quantity, quality, assortment) and delivery time, purchase and sale of real estate - a description of real estate and its price, construction work - their nature and result. Thus, the preliminary agreement should show on what conditions the parties will build their relations in the future. The term for concluding the main contract is also stipulated, which is usually up to one year.

Sometimes a situation arises when one of the parties refuses to conclude an agreement subsequently on the basis of an agreement of intent. In this case, the other party has the right to claim this in court by filing a claim for compulsion to conclude a contract. Also, the preliminary contract may indicate the amount of the forfeit (interest, fine) for delay or refusal to sign the final document.

Most often, a preliminary contract is concluded for capital construction, leasing, contracting, transportation, buying and selling real estate and other situations when it is necessary to carefully plan out the conditions for interaction. The parties must comprehend the terms of the contract and the consequences that arise after signing. That is why the creation of a document is usually preceded by negotiations between the parties with answers to various questions stipulated by the conditions. One way or another, preliminary agreements help to make informed decisions in the future.

It is worth remembering that the transfer of a deposit under a preliminary agreement to control the fulfillment of obligations is impossible. The document also does not provide for the conclusion of a compensation agreement, since, according to arbitration practice, this agreement cannot be the basis for the termination of the obligations of the parties in the future.

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