Meaning
Informal document used to record the facts, terms or intentions of a discussion between parties. A written memorandum provides a physical trail of a conversation that would otherwise exist only in memory. It functions to clarify the understanding of each participant and can be used as a reference point for future formal contracts.
The document stops applying once a final integrated agreement is signed by both parties.
Evidentiary Weight
While not always a binding contract, a contemporaneous note carries weight in a legal dispute. A written memorandum created immediately after a meeting captures the details of an agreement before they are forgotten or revised. It shows what was on the minds of the founders at the time the decision was made.
Transaction Summary
Complex negotiations often benefit from a summary of the points of agreement reached during a session. A written memorandum lists the key figures and dates to ensure that everyone is working from the same set of assumptions. It reduces the chance of a misunderstanding that could derail the drafting of a final deal.
Binding Nature
The intent of the authors determines whether the document creates a legal obligation. If a written memorandum includes a disclaimer stating it is for informational purposes only, it usually does not bind the parties to the terms. Without such a clause, a court might interpret the document as a preliminary agreement that requires the parties to negotiate in good faith.
This ambiguity makes the drafting of even informal notes a task that requires precision and care.
