What is an “Agreement to be Bound” or “Binding Effect” clause?..
This clause specifies which clauses of an agreement will be binding on the parties. Binding clauses are legally enforceable. In some agreements, all clauses will be of binding effect. In others, including term sheets and letters of intent (LOI), only some of the clauses will be of binding effect, and the other clauses will be non-binding statements of the parties’ intentions. The actual binding agreement will be negotiated based on the non-binding statements. The purpose of this clause in these types of agreements is to enable the parties to commit to some obligations, such as confidentiality; expiry; expenses etc.– without committing to the final terms of the deal, which will change as the parties continue to negotiate. It is important to pay close attention to which clauses are stated to be binding and which are not.In some cases, the party which has drafted the contract will want the entirety of it to be binding, and will merge this clause with an Entire Agreement clause by including language such as the following: "These Terms expressly supersede prior agreements or arrangements with you."
Blogs related to this clause:
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