Is a letter of intent binding?

Provided by:  Jennifer Kirschenbaum, Esq.

November 8, 2018

Question:

Jennifer, 

I am looking to sign a letter of intent with a potential buyer.  Is the letter of intent binding?  Can we negotiate the points in it later once I get you involved?  I want to start turning over materials for diligence and just want to send back.  Thoughts?   

Thanks, Dr. I

Answer: 

Whether or not the Letter of Intent ("LOI") is binding against the parties, in whole or partially, will totally depend on the language of the LOI.  Perhaps the confidentiality part of it, or maybe non solicit provision, if applicable, will be the only binding part, or perhaps the whole LOI.  Even if the terms are non binding, the LOI still represents a reviewed (and likely, at least somewhat negotiated) part of the proposed transaction.  Once the LOI is signed, the parties look to rely on it as a foundation of the transaction to come.  Re-negotiating elements of the LOI, while oftentimes necessary once more details get disclosed, is sometimes seen as negotiating in bad faith.  To the extent you see something in the LOI you are not comfortable with, it is always ill-advised to "just sign it and deal with it later".  Which is why some people (I'm on this list), prefer to go straight to contract - and avoid negotiating a document BEFORE the document.      

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