Head of practice
Attorney. Specialist in commercial and labor law. Over 16 years of experience in legal support of businesses - debt recovery, contract enforcement, recovery of damages, commercial property and lease disputes.
Agreement of intent
What is an Agreement of intent?
A Agreement of intent (hereinafter referred to as a memorandum of understanding or MOU) is a special type of agreement in a person’s economic life. The existence of this type of agreement is legally defined in the Civil Code of Ukraine (Part 4, Article 635) and the Commercial Code of Ukraine (Part 6, Article 182). Thus, based on the analysis of these provisions, a memorandum of understanding (another name for this document) should be understood as an agreement between counterparties that records agreements before concluding the main agreements. It may concern the coordination of key aspects of joint activities or the receipt of goods/services in the future, determining the stages of negotiations before concluding and signing.
It is necessary to distinguish the MOU from the preliminary agreement, which by its nature has greater legal force. Their main difference lies in:
- the imperative nature of the provisions (by signing the MOU, the parties express their desire to conclude an agreement on their cooperation in the future, while the preliminary agreement already creates such an obligation);
- the form of conclusion (the MOU, given its legal nature, can be concluded both orally and in writing, and the preliminary agreement - only in writing and sometimes with mandatory notarial certification);
- the specificity of its main provisions (while the MOU contains only provisions on key points (confidentiality, integrity, reasonableness, etc.) and the stages of negotiations on the conclusion of the main agreement, the preliminary agreement indicates a clear deadline for the preparation and signing of the main agreements, more specific terms of future interaction).
In addition, given the specifics of agreements of intent, they may not give rise to legal liability at all. Therefore, if the purpose of the parties is to consolidate only a desire without obligations, it is worth using an agreement of intent. Such agreements are most often concluded in the field of real estate and construction.
Terms of an agreement of intent
The main provisions of the protocol of intent should include:
- names of the parties (can be concluded by both legal entities and individuals);
- the purpose of this agreement (expression of a direct intention to conclude future agreements) - for example, the purchase and sale of real estate;
- the main conditions, parameters of the object, regarding which the main agreement will be concluded (for example, the area of the object, approximate cost, etc.);
- the main principles and obligations of the parties - in particular, conducting negotiations in good faith, observing the principle of confidentiality.
It is worth noting that the MOU may also give rise to separate obligations for one of the parties to the agreement, in particular in the form of conducting an assessment of real estate objects, preparing technical documentation for the land plot, obtaining the necessary permits for construction work in accordance with the law, etc.
Conclusion of an agreement of intent: legal aspects
When properly developing and concluding the analyzed document, it is important to understand, firstly, its difference from other contracts (since it is more essentially an agreement of intent to conclude a basic agreement, rather than an imperative agreement itself), and secondly, the basic principles of concluding contracts in economic activity.
Lawyers at “Prikhodko & Partners” recommend before directly concluding a letter of intent:
- to exclude the possibility of this document creating obligations to conclude a main contract (then the letter of intent will turn into a preliminary contract);
- to avoid including all the essential terms of the future main contract, if only the desire is expressed, not plans;
to provide for mandatory provisions on negotiations to consolidate possible further cooperation (otherwise there is a possibility that cooperation will simply stand still); - to also plan the phased signing of the preliminary, and subsequently - the main document on cooperation between future counterparties.
Legal support for the development and signing of a letter of intent
The law firm “Prikhodko & Partners” provides a range of high-quality legal services related to contractual activities. Clients who wish to receive support in the development and conclusion of the analyzed type of agreements can receive:
- professional advice on its legal nature;
- development of an individual project at the client's request;
- legal examination of an existing draft agreement;
- conducting high-quality negotiations between the parties in accordance with the principles stipulated by law to agree on further terms.
Conclusions. A letter of intent (protocol) is a preliminary agreement between the parties on the possible conclusion of basic agreements in the future. It contains only general principles of future cooperation and negotiations between the relevant counterparties. However, it is a useful tool for preliminary agreement without creating binding legal consequences. And contacting an experienced lawyer will help you avoid misunderstandings and create a clear and legally sound letter of intent that meets your needs.
Contact the lawyers of “Prikhodko & Partners” and receive high-quality support in developing and concluding agreements of intent. To receive a consultation, fill out the form below.
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