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What is Not a Legally Binding Contract?

Updated: Oct 7, 2021

Not all agreements are legally binding. An agreement that is not legally binding is not enforceable and is not recognised by the law as a contract.


If an agreement does not contain all of the essential elements of a contract, it is nothing more than words on a page or words spoken.


Here are some examples of agreements that are not legally binding contracts:

  1. A letter intent: an agreement which records an intention to enter into a legally binding contract, but nothing more, is not a contract that is recognised by the law

  2. A memorandum of understanding: A memorandum of understanding that sets out the understanding of a commercial arrangement, but nothing more, is not a contract that is recognised by the law

  3. Agreements about illegal activity: If an agreement relates to an illegal activity, it is (as a matter of public policy) unenforceable and not a contract that is recognised by the law

  4. An agreement that is subject to contract: An agreement that is intended not to become legally binding unless and until a contract is entered into, is not enforceable and is not recognised by the law as legally binding

  5. An agreement to agree: An agreement to agree is not recognised by the law as an legally binding contract. Instead, an agreement to agree is a precursor to a contract and does not satisfy the elements of a binding agreement


A contract that is not legally binding
A contract that is not legally binding


Author: Farrah Motley, Legal Principal of Prosper Law and an experienced contract lawyer.


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