Parties to commercial/commercial transactions are undoubtedly familiar with “terminology sheets,” “declarations of intent,” “statements of understanding” and “agreements in principle.” As the parties to these documents know, they outline the fundamental terms of the negotiated transaction. Where a declaration of intent is considered binding, the completion of work as part of its instructions is the adoption of a contract. Subsequently, A.J. Richard and Forest City developed detailed sales and sales contracts and development agreements (the “implementation documents”), as provided by the LOI to complete the transaction agreed in the ACT. From February 2007 to January 2008, A.J. Richard and Forest City exchanged several draft execution documents and their comments. Some declarations of intent were found to be binding because the parties contained overly detailed provisions, which gave the LOis the impression of being final agreements. If a deal is very simple, a letter of intent could be established with a model found online. However, it is almost always preferable to hire an experienced lawyer to produce the document. Parties should bear in mind that a declaration of intent is not binding.
The purpose of a letter of intent is only to finalize the details of a future agreement. The parties should not rely on the statement of intent so binding on the other party, as it is merely a means of facilitating discussions. The Memorandum of Understanding can also be used in discussions with bankers and investors as evidence of serious negotiations. Suppose a declaration of intent is not binding, but a company generates costs or provides only resources to defeat the agreement. In many cases, there is no recourse to losses incurred. However, it is possible that the party that broke up may have been found that it had not negotiated in good faith. But remember that this letter does not replace a contract. It is important that you sign a legally applicable agreement before you start doing things under it. Under U.S. law, an agreement is often the same as a Memorandum of Understanding. Indeed, it is virtually impossible to distinguish between a Memorandum of Understanding, a Memorandum of Understanding and a Declaration of Intent on the basis of American jurisprudence. All communicate an agreement on a mutually beneficial goal and the desire to see it until completion.
However, interim contracts can also be skeletal. If misrepresered, the parties are exposed to risks because of the absence of conditions that would otherwise be included in a final contract. In Ampleforth v Turner and Townsend  EWHC 2137 (TCC), the employer successfully sued the project manager for not advising him on the risks associated with declarations of intent. The statements of intent in question were not subject to a liquidation clause. As a result, the employer was unable to claim damages for construction delays with the contractor.