Is a letter of intent legally binding?

Usually only in part. Clauses like confidentiality and exclusivity bind, while the commercial deal stays subject to a final contract, if drafted clearly.

Can you be liable for breaking off negotiations after an LOI?

Possibly. Under HR Plas/Valburg, ending advanced negotiations in bad faith can give rise to liability for the other party's costs or lost profit.

What is the difference between an LOI and a term sheet?

In practice they are often used interchangeably. A term sheet tends to be more structured and tabular, while an LOI reads as a letter. Both serve the same purpose: recording agreed commercial points and framing the path to a binding contract.

Should confidentiality during negotiations be covered by an LOI or a separate NDA?

Either approach works. A separate NDA is cleaner if sensitive information is shared before the LOI is signed. Once an LOI is in place, a confidentiality clause within it is usually sufficient for the negotiation phase.

Can an LOI include a lock-out clause preventing talks with other parties?

Yes. A lock-out (exclusivity) period is one of the provisions that is commonly made binding in an LOI, preventing the other side from soliciting competing bids during negotiations. It must be time-limited and clearly defined.

Letter of Intent (Heads of Terms)

Records the parties' intention to negotiate a deal and which terms are already binding.

Qué es

A letter of intent (LOI), term sheet or heads of terms records the main commercial points the parties intend to agree and frames the negotiations. It is usually mostly non-binding, but certain provisions (confidentiality, exclusivity, costs and governing law) are normally made binding.

Por qué importa

An LOI aligns expectations early and protects sensitive information during talks. But under Dutch precontractual good-faith doctrine (HR Plas/Valburg), breaking off advanced negotiations can create liability, so the document must state clearly what is and is not binding.

Cómo aplicarla

State explicitly which clauses are binding and which are subject to contract.
Make confidentiality, exclusivity and cost allocation binding from signing.
Add an expiry date and conditions (e.g. due diligence, board approval).
Address how either party may break off negotiations and bear its own costs.

Consejos de negociación

• Be explicit that the LOI is non-binding except for named clauses, to limit Plas/Valburg risk.
• Use an exclusivity (lock-out) period to prevent the other side shopping the deal.

Errores frecuentes

• Drafting an LOI that, despite its label, is so detailed it reads as a binding contract.
• Breaking off advanced negotiations carelessly and incurring precontractual liability.

Referencias legales

Precontractual good faith (HR Plas/Valburg)
BW 6:248 Reasonableness and fairness Derecho neerlandés

Salvo indicación en contrario, las referencias remiten al derecho neerlandés (Burgerlijk Wetboek, el Código Civil neerlandés); los instrumentos de la UE como el RGPD se aplican en toda la UE. Se trata de información general, no de asesoramiento legal. Otras jurisdicciones tratan estos conceptos de forma distinta. Verifique el texto vigente y su situación con un abogado cualificado.

Preguntas frecuentes

Preguntas comunes sobre esta cláusula.