Is Our Preliminary Agreement Binding?

In the current economic environment there has been an increase in legal disputes where one party seeks to avoid being bound under a preliminary agreement and the other party seeks to enforce the preliminary agreement as a binding agreement.

It has become increasingly important for parties that are entering into commercial negotiations to make certain that any letter of intent, heads of agreement or memorandum of understanding clearly and unambiguously states whether the parties intend to be legally bound to the transaction immediately, or whether they wish to reserve their right to withdraw from the transaction later on and continue to negotiate before formal documentation is prepared and signed.