Contract Drafting Blog

On Wednesday, August 28, 2013 by Stewart L. Mitchell posted in Contract Drafting Blog
Caution needs to be exercised when drafting and executing preliminary agreements such as Letters of Intent, Memoranda of Understanding, Term Sheets or other similar documents. Do not rely solely on a legend or other disclaimer in the preliminary agreement. In the SIGA case, there was a subsequent agreement that trumped the LATS designation as “NONBINDING and PRELIMINARY.” However, if the term sheet itself had contained the obligation to negotiate in good faith, the analysis would be the same. Under the Delaware analysis, combining a preliminary agreement with an obligation to negotiate in good faith can significantly alter the parties’ rights and obligations. (Because principles of contract law are applied pursuant to each jurisdiction’s laws and court interpretations, the analysis must be made under the laws of the applicable jurisdiction.)

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