Memorandum Can and will be Considered a Binding Contract

Do not be overly impressed by the title ‘Memorandum.’ It can be considered a binding contract. It has often been ruled that a document entitled “Memorandum of Understanding” may in some circumstances be a binding agreement in itself, and in other cases, may be used only as “raw material” as part of critical contract negotiation.

For a memorandum of understanding to be considered a binding agreement, it must attest to the intention of the parties to enter into a contract and be sufficiently specific. Another requirement, unique to real estate transactions, is that the document will meet the “written requirement” set forth, as stated in section 8 of the Real Estate Law.

The main condition underlying the existence of the contract is the requirement for a meeting of desires between the parties and for the existence of a mutual agreement between them to enter into a binding agreement, which is reflected in the common conclusion.

The test for the conclusion of the parties’ opinion is an objective test learned from external criteria and includes the circumstances of the case, the conduct of the parties and their statements before and after writing the document, and the content of the document itself.

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