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Letters of Intent – Binding or Not?

At one time or another, and in a variety of settings. businesses enter letters of intent. Some come about after lengthy discussions, some come about after a few conversations. Few letters of intent contain all of the deal details and many lack pertinent, important details. If the letter of intent is a result of a few conversations, the parties may not have thought about the legal enforceability of the letter of intent. Conscious thought must be given to that consideration because letters of intent run the gamut from totally non-binding to fully binding, with many falling somewhere in between. The failure to consider enforceability, and the failure to properly document it, can lead to future disappointments and unpleasant surprises

Although case law is beginning to change, generally absent an express provision to the contrary letters of intent are not legally binding. If you are satisfied with the terms of the letter of intent, even if no further agreement defining terms is entered, expressly make the letter of intent binding. If there is some uncertainty about some of the terms, or if without further definitive agreement the deal as stated in the letter of intent is not acceptable, consider making only some of the provisions of the letter of intent binding. If the letter of intent is purely only aspirational and you need wide bargaining room going forward, make it clear that the letter of intent is not legally binding. Generally, most letters of intent will fall in the hybrid range.

Words do mean everything in this context.  To avoid future disappointments and unpleasant surprises, make sure all letters of intent receive legal clearance.

The above are things for you to think about and do not constitute legal advice. Before you enter a contract, consult with a qualified attorney.