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