By Preliminary Agreement

Even if the pre-agreement is binding, it does not create rights under the main contract, such as for example. B property rights. Therefore, it is not possible, for example, to resell an object of a pre-agreement on the sale of the object in question. For example, a signed member of the agreement may contain certain binding conditions, such as. B the confidentiality of transactions, but other important conditions of this provisional agreement can only be binding in the event of the performance of a more formal contract. If an agreement is reached on all the conditions, compliance with one or more of the conditions is subject to the execution of a formal document. The pre-contract defines the main elements of the transaction, such as the sale price and identity of the property concerned, its address and a detailed description (floors, rooms, etc.) with the cadastre data and the date of the final contract. It should also define all mutual obligations to be fulfilled before the property is handed over. With regard to the sale of real estate under construction, the law provides special rules for the preparation of the preliminary contract. It is not mandatory that the preliminary contract be drawn up by a notary, but it is nevertheless useful for a notary to clarify the obligations arising from it. A recent case illustrates the impact of capital gains tax (CGT) of an unintentional Category 4 agreement, considered binding in the execution of a pro forma agreement, and not at the later date of the conclusion of the formal sales contract.

Entering into contracts in commercial transactions can be an expensive and complex process involving multiple phases and actors, as well as significant investments in expertise and information. In the case of complex asset purchases, leasing contracts, business purchases or private equity transactions, to name but a few, it is virtually impossible for the parties to perform a fully established and binding contract in a single meeting or over a very short period of time. The negotiations of these transactions are usually sequenced, dealing with a subset of issues at each stage and by many agents with different skills. The parties often enter into preliminary agreements during their negotiations, often referred to as declarations of intent, agreements in principle, letters of commitment, declarations of intent or term sheets. These agreements reflect the agreement reached so far by the parties on some or all of the essential provisions of the underlying transaction, but they take into account the parties` remaining negotiations and settle them to some extent. . . .

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