Letters Of Intent

Letters Of Intent

A Letter of Intent outlines an agreement between two or more parties before the agreement is finalized. Although they resemble contracts, Letters of Intent are usually not binding on parties in their entirety. Many Letters of Intent contain provisions that are binding, such as non-disclosure agreements. A court may interpret a Letter of Intent as binding the parties if it too-closely resembles a formal contract.

A Letter of Intent may describe a corporation’s intention to execute a corporate action, such as a plan to buy or take over a company. Essentially, the Letter of Intent summarizes the main points of a proposed deal, or confirms that a certain course of action will be taken. It signifies a genuine interest in reaching the final agreement subject to due diligence, additional information, or fulfillment of certain conditions.

The language used in a Letter of Intent is of vital importance and determines whether it is only an expression of intent or an enforceable undertaking. If you are ready to enter serous negotiations and you would like to define your intentions formally in writing, allow our firm to help you reach that objective.

The Letter of Intent can also work in a fashion as a term sheet for a potential business transaction. They need to be clearly drafted to avoid pitfalls. You do not want to have it work as a contract if that is not the intention. It is however an important tool and can help eliminate the cost of a purchase agreement if the parties are not sure if an agreement can be reached.