Two parties to a real estate dispute signed a memorandum of understanding in preparation for a settlement agreement.
The Supreme Court found that the contract is binding as the cumulative requirements of intent and specificity were met. Parties’ intent to form a binding contract which can be concluded from the existence of two main elements: contractual intent, that is, the parties’ intention to create a binding contract and specificity, that is, that the agreement included all of the essential details. However, when there is significant evidence of agreement on the main aspects of the transaction, the memorandum of understanding should be considered as a binding contract, even if it lacks many details, all provided that such details can be completed in accordance to law. Here, the parties have explicitly stated that they had reached "agreements in principle" including the consideration that would be given and that the parties lawyers would complete the drafting of the agreement as a whole. Therefore, it appears that it was the parties’ clear intention to create a binding legal contract, where the missing details will be completed by the lawyers.