Is a Letter of Intent legally binding?

Generally, an LOI is non-binding, except for specific provisions like confidentiality, exclusivity, and governing law, which are usually explicitly stated as binding.

Why use an LOI instead of going straight to a contract?

An LOI allows parties to agree on the fundamental terms of a deal without incurring the expense of drafting a full legal contract. It serves as a roadmap for the final agreement.

Can I withdraw from an LOI?

If the LOI is non-binding, you can generally withdraw if you cannot reach a final agreement. However, you must typically negotiate in good faith.

What is an exclusivity clause in an LOI, and how long should it last?

An exclusivity (or "no-shop") clause prevents the recipient from negotiating with competing buyers for a set period while the parties work toward a final agreement. Typical exclusivity windows run 30 to 90 days depending on deal complexity. It is one of the few LOI provisions that courts tend to treat as binding even when the rest of the document is not.

Should an LOI include a purchase price or just a price range?

Including a specific proposed purchase price — even if subject to adjustment following due diligence — is generally better than a vague range. A defined number gives both parties a concrete anchor for negotiations, reduces the risk of misaligned expectations, and speeds up the path to a final definitive agreement.

Letter of Intent

A preliminary non-binding agreement outlining key terms of proposed business transactions, mergers, acquisitions, or partnerships. Clarifies purchase price, due diligence periods, confidentiality obligations, exclusivity provisions, and good faith negotiation expectations before drafting final contracts.

This Letter of Intent (the "Letter") is made effective as of 2023-10-01, by and between:

Sender: Company A Address: 123 Main St

AND

Recipient: Company B Address: 456 Market St

The Sender and Recipient may be referred to collectively as the "Parties."

1. Purpose

The purpose of this Letter is to set forth the material terms and conditions pursuant to which the Sender is interested in acquiring the assets of the Recipient (the "Transaction").

2. Purchase Price

The proposed purchase price for the Transaction is $1000000, payable as follows: Cash at closing.

3. Timeline

The Parties agree to work towards executing a definitive agreement (the "Definitive Agreement") by 2023-12-31.

4. Due Diligence

The Sender shall have a period of 30 days from the date of this Letter to conduct due diligence regarding the Transaction.

5. Exclusivity

For a period of 45 days, the Recipient agrees not to negotiate with any third party regarding the Transaction.

6. Non-Binding

Except for Sections 5 (Exclusivity), 7 (Confidentiality), and 8 (Governing Law), this Letter is intended to be a non-binding expression of interest and does not constitute a legally binding obligation on either Party.

7. Confidentiality

The Parties agree to keep the terms of this Letter and the negotiations confidential.

8. Governing Law

This Letter shall be governed by the laws of the State of Delaware.

SENDER

Date: 2023-10-01

Name: Company A

Title: CEO

Signature: _____________________________

RECIPIENT

Date: 2023-10-01

Name: Company B

Title: Owner

Signature: _____________________________

Vorlage anpassen

Effective Date

Target Closing Date

Sender Sign Date

Recipient Sign Date

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