In real estate and investment transactions in Dominican tourist destinations, the use of pre-contractual documents such as the Letter of Intent (LOI) and the Memorandum of Understanding (MOU) is common. Their use largely reflects the influence of Anglo-Saxon practices rooted in common law, especially in transactions involving foreign investors.
However, the Dominican Republic operates under a civil law system grounded in written law, the Civil Code, and special regulations. This structural difference does not invalidate the use of LOIs and MOUs in such transactions, but it does significantly affect their legal consequences—particularly when disputes arise and the signed documentation must be analyzed by a judge or arbitrator.
Under Dominican law, there is no contract without definitive consent regarding the essential elements of the obligation. The intent to be bound is not presumed; it must be clear, express, and verifiable. In this regard, both the LOI and the MOU: i) do not replace the final contract, ii) do not generate full obligations, and iii) in most cases may produce limited legal effects, depending on their content and drafting.
When a dispute arises, the analysis does not focus on the name of the document, but on its actual content. The judge or arbitrator will assess: i) which clauses are binding, and ii) whether the essential elements of a contract are present.
The primary purpose of an LOI is to move forward without closing the transaction; it allows one party to express a firm intention to negotiate while preserving flexibility as the applicable due diligence process is carried out. Under Dominican law, an LOI does not obligate the parties to close the transaction. However, in some cases, what appears to be an LOI may actually function as a disguised promise-to-sell agreement, where the express intent of the parties exists, making it enforceable.
In principle, an MOU is used when preliminary consensus already exists between the parties and there is a desire to document a more structured framework for cooperation. Even so, it is not presumed to be fully binding unless it contains the essential elements of a contract or clearly identifies obligations and an express intent to be bound. As with LOIs, in the event of a dispute, the legal analysis focuses not on the document’s title but on its actual substance.
Legal advisors have the responsibility to properly guide their clients—especially foreign ones—who come from jurisdictions where, for example, common law prevails and where legal tools do not necessarily align with our laws and practices. This helps avoid creating unrealistic expectations, as contentious scenarios may reveal issues that negatively impact the client.
The use of LOIs and MOUs in the Dominican Republic is neither incorrect nor incompatible with civil law, but it does require legal adaptation. Importing common law models without translating them into the Dominican civil law system is one of the main sources of pre-contractual disputes.
At DHOZ Abogados, we understand that the pre-contractual stage is a critical moment in any transaction. Our approach is not to slow down operations, but to anticipate risks, align expectations, and structure decisions—from the first document to the final closing.
