![]() To determine if the parties’ subsequent conduct proves for the MOU to be legally binding, the court looked at whether the parties had acted on an assumed state of facts or law. This showed the parties’ intention for the MOU to be legally binding. Party A was also employed by the Party B’s company according to the MOU, and acted as the company’s paid executive director despite not being formally appointed as such. The parties performed obligations that were provided in the MOU such as keeping each other posted on all trades conducted and consulting a law firm regarding the drafting of the subsequent agreement. The fact that the MOU envisioned signing of an additional agreement later on did not make it any less binding. The MOU contained very specific details, including the price of shares. The language of the MOU and details spelt out showed that the parties intended for it to be a binding contract. The court considered the following key factors in its decision: The MOU’s language and contents The court was not restricted by the document’s label (that an MOU is non-binding), but instead examined the document’s language and surrounding evidence to determine its legal effect. The Singapore High Court in Bassatne Mohamed v Rifaat El Gohary has held that an MOU was a legally binding contract. However, the court may also interpret an MOU as a binding contract and therefore a legally binding document, depending on the facts at hand. This incompleteness often indicates parties’ intention not to create legally binding relations until the enforcement of a formal contract or agreement. Generally, MOUs are non-binding because they are often incomplete agreements that are subject to a written contract. However, if the deal falls through and one party backs out, the question of whether the party is legally bound by the MOU arises. Provide proof of the future business transaction to any potential investors.Īfter an MOU is signed and if the parties involved are still committed to undertaking the deal, they typically wait for a formal and final contract to be drafted.Make a public announcement that parties are in negotiations and have plans to enter into a contract and/or.Keep all relevant persons updated with the progress of negotiations by recording any negotiations milestones, points discussed and decisions made.Construct a structured framework including the scope and extent of future negotiations.Provide assurance to parties by discussing all the key points of the eventual contract.Ensure that parties are on the same page with regard to certain essential terms. ![]() ![]()
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