As a result it is timely to review principles that those negotiating informal agreements should be aware of to avoid problems of enforceability later.
Informal agreements appear in many different guises.
Heads of Agreement, Letters of Intent, Memorandum of Understanding and Memorandum of Agreement are probably the most commonly used terms. They all tend to reflect an outline of the agreement or understanding reached by the parties ahead of a more formal and comprehensive contract being negotiated. Sometimes it is important to one or both parties to record the basic terms of an agreement to prevent the other party, during the formal contract negotiations, from attempting to renegotiate the points already agreed. In other situations the parties may simply wish to mark progress in their discussions by recording what has been agreed so far, but without intending to become legally bound until a formal agreement is entered into. Unfortunately, in some circumstances, one of the parties will want the informal agreement to be legally binding while the other will not.