Preliminary Agreements: Binding or Not?

• CPD Points: 0.75 [PS] [SL]
• Price: $60.00
• Area: Commercial Law; Contract Law; Courts and Tribunals; Property Law
• Delivered: April 2023

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• Recording
• No Papers

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Description

The Honourable Justice Alan Blow AO presents into the Property and Commercial Law Conference 2023 on how to distinguish between binding and non-binding heads of agreement, letters of intent and MOUs; and conditions precedent to formation; and recent cases. In this regard, His Honour also provides some drafting tips.

Session outline

• When preliminary agreements do not expressly state whether they are intending to be binding or not, the intention of the parties must be discerned from the terms and context of the document.
• The conduct of the parties can be taken into account by a court to determine whether a binding contract was made, but not for the purpose of determining the meaning of the words used by the parties.
• When a preliminary agreement expressly states that it is intending to be binding, it will not be binding if it is incomplete as a result of an essential, fundamental or critical term being left out.
• When the parties intend to create a legally binding agreement, a court must do its best to give effect to that intention, despite any difficulties of interpretation.

Key takeaways

If drafting a preliminary agreement:

• The document should state whether it is intended to be a legally binding contract.
• Contingencies should be provided e.g., what is to happen if planning approval or sub-division approval is refused?
• If a document contemplates favourable decisions by any non-party, the consequences of an unfavourable decision or a lack of decision should be provided for.