What Is a Draft Agreement Called
When it comes to legal documents, there are a lot of terms to keep track of. One of the most important types of legal agreements is a draft agreement, which is a preliminary version of a contract that is still subject to revision and negotiation. But what is a draft agreement called, and what are some of the key things to know about this type of legal document? In this article, we`ll take a closer look.
There are a few different terms that can be used to describe a draft agreement, depending on the context and the specific type of agreement involved. Some common terms include:
– Memorandum of understanding (MOU): This is a type of draft agreement that is often used in the business world to outline the key terms of a potential partnership or other type of business collaboration. MOUs are often less formal than traditional contracts and may be used to simply establish a framework for further negotiation.
– Letter of intent (LOI): Similar to an MOU, an LOI is a type of draft agreement that outlines the basic terms of a deal between two parties. LOIs are often used in real estate transactions or other types of complex business deals.
– Term sheet: This is another type of draft agreement that is commonly used in the business world. A term sheet outlines the key terms of a potential investment in a company, including things like the amount of money being invested, the ownership stake being acquired, and any specific terms or conditions attached to the investment.
Regardless of the specific term used, all of these types of draft agreements share some common characteristics. They are typically non-binding, meaning that the parties involved are not legally obligated to follow the terms outlined in the draft agreement. Instead, the document serves as an initial outline of the terms that will eventually be included in a formal, legally binding contract.
Another important thing to know about draft agreements is that they are subject to revision and negotiation. Once a draft agreement has been created, the parties involved will typically go back and forth to make changes and negotiate specific terms. This process can take some time, and it`s important to have experienced legal counsel on hand to help navigate the negotiation process.
In summary, a draft agreement is a preliminary version of a legal contract that is still subject to revision and negotiation. Depending on the context, draft agreements may also be referred to as memorandums of understanding, letters of intent, or term sheets. These documents are non-binding and serve as an initial outline of the terms that will eventually be included in a formal, legally binding contract. If you are involved in creating or negotiating a draft agreement, it`s important to work with experienced legal counsel to ensure that your interests are fully protected.
