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The declaration of intent in our scenario could lead to two types of binding pre-agreements: (1) an agreement requiring the parties to complete the transaction on the basis of agreed material conditions (“Type I”) and (2) an agreement requiring the parties to negotiate in good faith a final agreement on the basis of the essential conditions (“Type II” described in the Mou).). The potential applicability of our declaration of intent as a Type I or Type II preliminary contract and the standard of proof of the enforceability of the declaration of intent differ according to applicable state law. Consider the following known scenario: a private company has identified a possible strategic acquisition, entered into a valid confidentiality agreement and concluded its initial management for the purpose. The buyer and target then exchange a number of emails describing (i) the agreed settlement of the essential terms of the eventual acquisition (possibly a joint agenda) and (ii) the intention of the parties to follow the transaction under the conditions described in the email or newspaper. The next step is to ask his lawyer to draft a Memorandum of Understanding reflecting the essential terms of the proposed transaction and providing for an exclusivity period during which the parties agree to negotiate in good faith the conclusion of a final sale agreement. The parties sign the Memorandum of Understanding with the language stating that it is not binding, except for confidentiality and exclusivity. After carefully working on a final agreement, but before the expiry of the exclusivity period, the buyer decides, on the basis of his due diligence, not to pursue the transaction and immediately informs the objective of his decision. [7] See tech base. Corp. v.

Amazon.com, Inc., 878 N.E.2d 952 (Mass. Ct. App. 2008) (e-mail from Counsel summaris key settlement terms was concluded in a binding agreement on the “correct” response. “). In The Speed of Trust, Stephen M.R. Covey argues that with low confidence, speed decreases and costs increase. If I don`t trust you, I have to take additional steps to document our agreement and take security precautions to cover mine. It wastes time and costs money. The Delaware and New York courts have obtained Type I and Type II pre-agreements. [24] Like Texas, Massachusetts and Delaware, Type I front-line agreements are established only in New York law “if the parties agree on all points requiring negotiation (including whether they should be initiated), but agree to commemorate their agreement in a more formal document.” [25] Similarly, the formation of a Type I contract in Delaware requires sufficiently specific conditions.

[26] In both states, the question of which concepts are essential is considered on a case-by-case basis. Delaware and New York also authorize the application of preliminary Type II agreements where the parties demonstrate that they wish, in good faith, to be obliged to deal with outstanding issues in order to reach an agreement. [27] Acquisition financing commitment documents are the most common example of a Type II pre-agreement. [28] The standard commitment documents are not applicable as a final agreement, but rather provide for a definitive loan agreement that “contains such guarantees and guarantees, terms of agreement, other agreements, failure events and characteristics, requirements for the delivery of contracts and other information and provisions, as usual and as usual.” [29] Under Delaware and New York law, our Memorandum of Understanding is probably at least a Type II preliminary decision with a binding obligation to negotiate in good faith on the basis of agreed material terms.