Example Of Letter Of Intent

The letter of intent is one of the legal documents that is used in the initial stages of negotiation, for example, during the acquisition or disposal of a business. Letter of Intent, legally, is very confusing. In law, we either have a contract or don’t. Letter of Intent clearly states that it is not a formal agreement and then often proceeds to set forward agreed terms for the proposed transaction. Generally from the paradox, if the deal goes wrong or if there is a problem with the deal, One party can argue that a party agreed to the deal is a complete agreement, a binding contract and, in some cases, the party relied upon the Letter of Intent will have monetary damages based on its reliance on LOI. Therefore there is no simple answer whether the LOI is binding or not. The LOI can be binding, cannot be binding, some parts binding and some parts not binding.

Many courts understand that the LOI is a non-binding concept. There are exceptions where a court considers the LOI as the real deal. If the court considers the Letter of intent to be binding, then there will be a contract with all essential terms and without the many terms that are associated in a general agreement – a liability limit, warranty waivers, detailed payment and stock terms, etc. If the court upheld the case against Letter of intent, then there will be a worst possible contract that is formed – in which either the court or the parties will have to work out all the details of the agreement when the parties have problem with one