Sushant Contract Training Series : Part 3

Letter of Intent (LOI)

An agreement to enter into an agreement

Parties may not be bound by any terms of the LoI in the event of

failure of negotiation and no definitive agreement is reached.

An agreement with open terms

Parties will be bound by an implied contract based on the basic

terms stated in the LoI even if they fail to reach a definitive

agreement.

LoI may be a binding contract depending on the terms and clauses used in

the LoI.

Functions of LoI

Expresses a convergence of will between the parties, indicatingS

an intended common line of action.

Clarify key points of a complex transaction for the convenience

of the parties

Declare that parties have entered into negotiation

Provide exit mechanism in the event of failure of negotiation

Provide safeguards in the event of failure of negotiation

Provides for exclusivity (during process of negotiations)....to be contd

Sushant Contract Series Part 2nd

Essential Elements of Contract

Intention to create a legal relationship

Proper offer and its acceptance

Lawful object

Agreement not expressly declared void

Free Consent: Consensus ad idem

Capacity of parties to contract

Possibility of performance

Lawful consideration

Pre-contractual Agreements

Pre- Contract stage

Term Sheet/ Letter of Intent (LOI)

Non-Disclosure/ Confidentiality Agreements

Some forms of Letter of Intent (LoI):

Term Sheet

Discussion Sheet

Commitment Letter

Agreement in Principle

Memorandum of Understanding

Memorandum of Terms

Heads of terms/Heads of agreement....to be contd...

Contract Drafting Series :Part 1

Hi Guys starting today I am launching Contract Drafting Series to help and learn with you to learn and share this marvelous field of Contract Drafting:

First Part : Negotiating of Contract

“Negotiation, we may say, ought strictly to be viewed simply as means to an end; it is the road the parties must travel to arrive at their goal of mutually satisfactory settlement. But like other

means, negotiation is easily converted into an end in itself; it readily becomes a game played for its own sake and a game played with so little reserve by those taken up with it that they

will sacrifice their own ultimate interests in order to win it.”

Lon L. Fuller, Anatomy of the Law

Negotiation of Commercial Contracts

Negotiation involves a two-step plan:

Preparations for the negotiations

Thorough Preparation

Understanding and focusing on the needs of the other party

Objective Outlook – Separation from the desired outcome

Fashioning “Win/Win” Opportunities

Negotiation of key terms, execution of confidentiality agreement:

Prior to engaging in negotiation, execute confidentiality or non-disclosure

agreement

Key clauses to be agreed to (Performance clauses, Covenants and

obligations, consideration, collaborations agreed to, non-compete/nonsolicit

issues, governing law, dispute resolution, costs, etc.)

Enter in to a term sheet or letter of intent....to be continued