lesson 5

Question 1

What are common pre-contractual documents in international business?

Answer 1

Letter of Intent (LOI), Memorandum of Understanding (MoU), Non-Disclosure Agreement (NDA), and Heads of Agreement (HoA).

Question 2

What is the main purpose of a Letter of Intent (LOI)?

Answer 2

To outline the parties’ intentions and expectations prior to a definitive agreement, often used to initiate negotiations.

Question 3

Are pre-contractual documents legally binding?

Answer 3

Not necessarily. Their binding nature depends on wording, structure, and actual party behaviour. Some clauses can be binding, others non-binding.

Question 4

What is a common structure for split binding/non-binding LOIs?

Answer 4

E.g., Article 1: non-binding negotiation goals; Article 2: binding clauses like confidentiality, cost allocation, or jurisdiction.

Question 5

What determines whether an LOI becomes binding?

Answer 5

Language indicating commitment (e.g., “shall”, “must”), mutual obligations, and whether the document includes key commercial terms.

Question 6

What are the risks of pre-contractual liability?

Answer 6

If a party unjustifiably breaks off negotiations or misleads the other, they may incur liability under culpa in contrahendo (civil law).

Question 7

What is “culpa in contrahendo”?

Answer 7

A civil law doctrine establishing liability for bad faith behaviour or negligent conduct during pre-contractual negotiations.

Question 8

What behaviour can create pre-contractual liability?

Answer 8

Breaking off negotiations abruptly, failing to disclose key information, or pretending to negotiate without intent to agree.

Question 9

How do common law and civil law differ in pre-contractual duties?

Answer 9

Civil law recognizes duties of good faith and disclosure, while common law allows parties to walk away freely unless contractually restricted.