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First Principles of Business Law |
| Making a contract |
| 2. The first essential element of formation: Intention to be legally bound |
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2.7. Agreements that are to be formalised later |
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Read the facts and the question and then choose the best answer. A says: "I will sell you my business for $100,000. But, to be sure there is no doubt about this deal, I want our lawyers to first draw up a formal contract for both of us to sign." B says: "I agree to buy your business for $100,000. I will sign all the formal documents when they are ready." On these facts, does it appear that A and B intend to be legally bound by this agreement even before it is written up and signed?
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(a) Yes, because agreement has been reached and the written contract is only a formality. (b) No, because even though agreement has been reached, it is not intended to be binding until the formal contract is drawn up. |
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