Can I sign a letter of intent? Is a letter of intent the same as a contract? Must be different?

Letter of Intent (MOU), there are many versions, investment letter of intent, lease letter of intent, letter of intent to buy and sell, letter of intent to cooperate, etc. What is the legal position of a letter of intent? What is the legal effect of a breach of a letter of intent? Is the Letter of Intent legally binding? If it has legal effect, what kind of legal effect does it have? If I signed a letter of intent, is it okay if I did not sign the contract? The following article will focus on that.

What is a Letter of Intent?

A letter of intent is a kind of expressing the wishes of both parties, expressing the willingness of both parties to sign a formal agreement, and expressing the signing of major legal documents within a certain period of time, usually mergers and acquisitions, real estate leasing or trading, capital contribution, etc. Letter of Intent for the sale and purchase of vaccines.

Take the letter of intent for real estate leasing as an example, it may contain the following contents

Letter of Intent for Real Estate Leasing
1. Lease subject matter (location, land number, house number address)
2. The conditions that the lessee is willing to rent, such as how much rent per month, rent mortgage, etc.
3. Lease period
4. Exclusivity clauses, restricting any party from contacting other lessees or other transaction objects for a certain period of time, to ensure the degree to which the contract can be discussed

Other expressions of interest may also include:
1. Confidentiality clause. Before the transaction is concluded, specific information must be disclosed to each other. Through the signing of the confidentiality clause, all parties are encouraged to exchange sensitive business information to speed up the signing process.
2. Expense sharing terms, usually each of them bears the expenses before signing the official transaction documents, such as the appraiser they find by themselves, etc.
3. Terms of Governing Law and Dispute Resolution

Legal validity of a letter of intent?

The letter of intent is to indicate the willingness of both parties to sign this contract, so the final failure to complete the contract will not constitute a violation of the letter of intent. Even so, you still need to pay attention to the confidentiality clause or exclusivity clause in the letter of intent. If you violate other clauses, you may violate the letter of intent and you must be liable for damages.

But it must be noted that the intent is not signed into a contract!

There have been cases in the past where the court determined that the letter of intent for real estate leasing was not a letter of intent, but a lease contract. Even though the title of the contract is still a letter of intent.
Why is this so?

When a Taiwanese court judges whether a contract is established, it is to determine whether the "necessary points" of the contract are consistent. If an agreement has been reached, even if other details have not been negotiated, the contract will still be considered established.

Taking the real estate leasing contract as an example, the "necessary points" are the leasing subject matter (that is, the real estate itself) and the rent. Therefore, if these two points have been clearly agreed, it is very likely that the contract has been established!
In other words, as long as the location, block, and rent of the leased object are clearly stated, the real estate lease contract is established. At this time, if the lessee does not rent because it finds a better place or the lessor finds a better tenant, it will constitute a breach of the lease contract! The lessee may even have to pay rent, and the lessor has to pay for damages that the lessee can't rent!

How to keep the Letter of Intent?

Of course, the necessary points of the contract should be vaguely dealt with, but it should be noted that it should not be so vague that Shufang, who signed the letter of intent, will overuse the vague space when negotiating the contract. When it comes to the end, she has been entangled in the necessary points (location, rent) of the lease contract. unclear.

Therefore, the method that can be taken is that "the rent does not agree on a specific number, but a certain amount of money" , and negotiate the lease contract under the condition of a specific lease subject matter.

For other types of letters of intent, such as buying and selling, you need to pay attention to the quantity and price, and you can agree on a certain range rather than a specific number to prevent the letter of intent from becoming a contract.

Finally, even if the letter of intent states "this is a letter of intent, not a contract, and has no contractual effect", the letter of intent may still be recognized as a contract by the court! The court will determine the content of the contract in detail!

Original link: Kai's Lawlawland