Precontracts
Precontracts are agreements or instruments entered during negotiations that precede a final contract. They set out the intentions of the parties to negotiate a future contract and may define key terms, milestones, or conditions that will bind the parties once a formal agreement is executed. Common forms include letters of intent, memoranda of understanding, heads of terms, and option contracts that give one party the right to formalize a deal within a specified period.
Binding or non-binding nature depends on the language and law. Many precontracts are expressly non-binding, with
Legal effects vary by jurisdiction. In civil law systems, there is a recognized duty to negotiate in
Practical considerations include defining scope, duration, conditions precedent, confidentiality, exclusivity, and dispute resolution. Neglecting clear terms