Drafting a Preliminary Agreement

Note: Want to skip the guide and go straight to the free templates? No problem - scroll to the bottom.
Also note: This is not legal advice.

Introduction

The drafting of a preliminary agreement is an essential step in any business transaction or real estate transaction. It is a legally binding document that ensures that all parties involved have an understanding of their rights and responsibilities. It provides an important safeguard for both sides by outlining the terms and conditions of the transaction, as well as the expectations for each party. Without it, negotiations can quickly become costly disputes.

At minimum, a preliminary agreement should include details about all parties involved in the deal; what the scope of the agreement entails; payment terms; timeline for completion; and governing law. These are key elements in providing both parties with necessary protections should either side breach the contract or if a dispute arises further down the line. Furthermore, it is important to note that whilst this document provides legal parameters around negotiations, it does not provide consensus between two sides – this must be agreed upon separately.

For those unsure how best to go about writing such an agreement and ensuring they are legally sound, Genie AI has developed a step-by-step guide offering advice on how best to identify potential risks and ensuring protection for all involved in what can be complex negotiations or transactions. Our team also provides free preliminary agreement templates that provide users with access to millions of data points teaching them what a market-standard document looks like - without having to pay for costly legal assistance. Signing up is not necessary but we believe our steps can help simplify what can be daunting task without putting anyone at risk from legal repercussions or financial losses from miscommunications caused from inadequate drafting of documents.

Whether you’re buying property, signing contracts on behalf of your business or entering into other agreements with third parties - having access to sound advice on how best proceed with constructing your own contract can provide invaluable peace-of-mind when negotiating complex transactions. We invite readers ‘below’ for our step-by-step guidance on drafting legal documents as well as information on how to access our template library today – so you don’t have to worry about costly misunderstandings or disputes arising out of inadequate documentation ever again!

Definitions (feel free to skip)

Parties: People or organizations involved in the agreement.
Subject Matter: The subject or topic that the agreement covers.
Negotiation: The process of discussing and reaching an agreement on a certain issue.
Relevant Laws: Laws and regulations that could affect the agreement.
Terms: The details of the agreement and how it will be carried out.
Contingencies: Possible events or situations that may occur, such as if one party decides to breach the agreement.
Remedies: Solutions or actions that can be taken if a problem or dispute arises.
Witness: Someone present when the agreement is signed who can verify the validity of the signatures.

Contents

• Establishing a Framework
• Identifying Goals and Objectives
• Researching Relevant Laws
• Defining Terms
• Identifying Contingencies
• Drafting the Agreement
• Reviewing and Revising the Agreement
• Finalizing the Agreement
• Signing the Agreement
• Distributing the Agreement

Get started

Establishing a Framework

• Brainstorm a framework for the preliminary agreement to ensure both parties have a shared understanding of the scope of the agreement
• Create a timeline for the agreement to ensure that all goals and objectives are met in a timely manner
• Discuss the roles of each party in the agreement and any expectations that each party may have
• Set up communication protocols for the agreement, including methods of communication, frequency of communication, and who will be responsible for responding to inquiries
• When both parties have agreed to the framework, timeline, roles, and communication protocols, you can move on to the next step: Identifying Goals and Objectives.

Identifying Goals and Objectives

• Collaborate with the other party to determine the objectives of the agreement
• Make sure to keep track of all points of discussion for further reference
• Draft a preliminary list of goals and objectives for the agreement
• Discuss the list with the other party to ensure all goals and objectives are agreed upon and understood
• Check off this step once an agreement is reached on the list of goals and objectives.

Researching Relevant Laws

• Gather information regarding relevant laws and regulations associated with the agreement
• Consult with an attorney to ensure that the agreement is in compliance with all applicable laws
• Research case law related to the agreement
• Review relevant statutory laws that could affect the agreement
• Determine if any laws or regulations could impose additional obligations on the parties
• Once you have identified all applicable laws, regulations, and case law, you can proceed to the next step.

Defining Terms

• Identify terms that need to be defined to provide clarity and avoid any potential misunderstandings
• Research any legal definitions of terms and incorporate them into the agreement
• Draft definitions that are clear and concise
• Review definitions with the other party to ensure that there is agreement
• When both parties agree on the definitions, check off this step and move on to Identifying Contingencies

Identifying Contingencies

• Brainstorm potential scenarios and conditions that could affect the agreement
• Determine which of these scenarios and conditions should be included in the agreement as contingencies
• Outline the specifics of each contingency based on the results of the brainstorming session
• Establish which party is responsible for meeting each contingency and ensure that it is clearly stated in the document
• When all contingencies have been identified and outlined, you can move on to drafting the actual agreement.

Drafting the Agreement

• Gather relevant information needed for the agreement, such as the parties involved, the duration of the agreement, and the scope of the agreement
• Determine the legal structure of the agreement, such as a contract, memorandum, or letter of intent
• Outline the terms and conditions of the agreement, including any contingencies, obligations, and restrictions
• Draft the agreement using the information gathered
• Have each party review and sign the agreement
• Once both parties have signed, you can check this step off your list and move on to the next step, which is reviewing and revising the agreement.

Reviewing and Revising the Agreement

• Carefully review the document and make sure all the details and language specified in the agreement are accurate and up-to-date
• Check that all parties involved in the agreement have been identified, and that the rights and obligations of all parties are clear
• Ensure that the document is legally sound and all obligations are enforceable
• Make any necessary edits or changes to the document
• Once all revisions have been made, check that all parties have agreed to the terms of the agreement
• Check that all signatures have been affixed to the document
• You will know that this step is complete once all revisions have been made and all parties have agreed to the terms of the agreement by signing the document.

Finalizing the Agreement

• Carefully review the agreement and make any necessary changes or additions
• Ensure that all parties have accepted the agreement and that any changes have been recorded
• Make sure all parties have properly signed and dated the agreement
• Generate a copy of the agreement that is legally binding
• When all of these steps are completed, the agreement will be finalized and ready for signing
• Check off this step when all parties have agreed to the terms of the agreement and the agreement has been signed and dated.

Signing the Agreement

• Have the parties involved sign the agreement with their full legal names, titles, and contact information
• Have the signatures notarized if needed
• Ensure that the date of signing is recorded
• Record the number of copies that were signed
• You will know that this step is complete when you have all of the necessary signatures on the agreement and all copies have been notarized and distributed (if applicable)

Distributing the Agreement

• Identify those who need to receive a copy of the agreement
• Use secure methods to send the agreement to each party
• Ask each party to sign a receipt that they have received the agreement
• Follow up with parties who have not signed a receipt
• Check off this step when all parties have signed a receipt acknowledging they have received the agreement.

FAQ:

Q: Is a preliminary agreement legally binding?

Asked by John on February 1st 2022.
A: A preliminary agreement is a precursor to a binding contract, but it is not legally binding itself. It is important to note that your preliminary agreement should clearly state that the parties involved are not yet bound by the terms of the agreement and that it is subject to a formal contract being drafted and signed at a later date.

Q: How long does it take to draft a preliminary agreement?

Asked by Emma on April 3rd 2022.
A: Drafting a preliminary agreement can take any amount of time, depending on the complexity of the agreement and the expertise of the lawyers involved. Generally speaking, it can take anywhere from a few days to several weeks for both parties to agree on the terms and conditions of the agreement.

Q: What do I need to include in a preliminary agreement?

Asked by Jack on June 15th 2022.
A: A preliminary agreement should include all the essential elements of an eventual binding contract such as parties involved, purpose of the agreement, rights and obligations of each party, remedies for breach of contract, dispute resolution procedures, governing law and jurisdiction, etc. Additionally, it should also include an explicit statement that the parties are not yet legally bound by the terms of the agreement until a formal contract is drafted and signed.

Q: What are the differences between UK, US and EU laws when drafting a preliminary agreement?

Asked by Mary on October 9th 2022.
A: The differences between UK, US and EU laws when drafting a preliminary agreement can be significant in some areas such as dispute resolution procedures or governing law and jurisdiction. In most cases, both parties must consider their respective national laws when drafting an international preliminary agreement (i.e., one between two countries), as well as any applicable EU laws which may be relevant depending on their situation.

Q: Are there any industry-specific considerations I need to take into account when drafting a preliminary agreement?

Asked by David on November 28th 2022.
A: Yes, depending on your industry and sector there may be specific considerations you will need to take into account when drafting a preliminary agreement. For example, in the software industry you may need to include specific language regarding intellectual property rights or licensing terms. Similarly, in the B2B space you may need to include provisions related to data privacy or other commercial relationships between business partners.

Q: Are there any standard clauses I should include in my preliminary agreement?

Asked by Jessica on August 22nd 2022.
A: Yes, there are certain standard clauses which should be included in all preliminary agreements regardless of industry or sector. These include clauses such as a statement that parties are not yet legally bound by the terms of the agreement until a formal contract is drafted and signed; dispute resolution procedures; governing law; jurisdiction; governing language; etc., all of which should be tailored to meet your particular needs and circumstances.

Q: Are there any additional documents I will need when drafting a preliminary agreement?

Asked by Matthew on January 14th 2022.
A: Depending on your particular situation and needs you may need additional documents when drafting a preliminary agreement such as non-disclosure agreements (NDAs), warranties or indemnity clauses, etc. It is important to ensure that all necessary documents are included in order for your preliminary agreement to be valid and enforceable under applicable law.

Q: Is an electronic signature sufficient for my preliminary agreement?

Asked by Sarah on March 16th 2022.
A: Yes, electronic signatures are generally accepted as sufficient for most types of contractual agreements including preliminary agreements in most jurisdictions including UK, US, EU etc., provided certain legal requirements are met (e.g., that the signature is reliable). It is recommended that you consult with an experienced lawyer prior to using electronic signatures for legal purposes in order to ensure that your signature will be legally binding under applicable law.

Q: Do I need different versions of my preliminary agreement for different jurisdictions?

Asked by Michael on July 5th 2022.
A: Depending on where you are based and where your counterparties are based you may need different versions of your preliminary agreement in order to make sure they are compliant with relevant local laws (e.g., US vs UK vs EU). It is recommended that you consult with an experienced lawyer prior to signing an international contract in order to ensure that all versions comply with applicable law in each jurisdiction where parties are based or have operations/business interests.

Example dispute

Suing a Company Based on an Unfulfilled Preliminary Agreement

• The plaintiff may claim that the company failed to fulfill the terms of the preliminary agreement.
• The plaintiff can use the agreement as evidence that the company is legally obligated to provide what was promised.
• The plaintiff may provide relevant documentation such as emails, text messages, or other communications to prove the agreement and its terms.
• The plaintiff may also provide evidence of the company’s breach of the agreement, such as failing to meet deadlines or provide promised goods or services.
• The plaintiff may seek damages or other forms of restitution, such as restitution for any losses suffered as a result of the breach.
• The plaintiff may also request that the court order the company to fulfill the terms of the agreement.
• The court may also order the company to pay any legal costs associated with the case.

Templates available (free to use)

Preliminary Agreement

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