Deal-making is a long and arduous process. After getting the details hashed out in purchase agreements, most people believe that negotiations for the final agreements come in next, but this is not the case. In fact, a Letter of Intent -- considered the second step in deal-making -- acts as the bridge between a “handshake deal” and the final contract.
The Letter of Intent, most commonly known as the LOI, is considered a non-binding document that outlines the terms of a proposed deal. This is written specifically to confirm that a deal has been reached, and that all parties are on the same page in their negotiation. Although a lot of those who are new to the world of business believe Letters of Intent to be a waste of time and money, this view is considered to be short-sighted by veterans. Parties have more to lose in drafting definitive contracts too early, only to watch the deal fall apart. Seeking to resolve all the terms in a Letter of Intent is a safer, less riskier way to close deals in the future.
Among the details outlined in the LOI include transaction structures, definitive agreements that are meant to be negotiated and signed, the significant terms of the said agreements, and the drafting responsibilities of each party’s counsel.
Other provisions governing the final contract shall also be drafted in the Letter of Intent This include due diligence rights and reimbursement of expenses, among others. The LOI may also contain some provisions that are explicitly binding such as confidentiality agreements, exclusivity in the dealings, and rule of laws. However, the rest of the negotiation provisions remain non-binding. Still, despite its overall non-binding nature, the Letter of Intent still provides a roadmap to the negotiation, as well as the entire deal-making process, making it a definitive document that will help prevent numerous renegotiations in the future.
Whether you are looking to buy or sell properties or businesses, the Letters of Intent that are available on this website will help you get started in drafting the terms you want to outline in your negotiation and deal-making process. Simply look for the LOI that is best fitted for your situation and edit as you find necessary. Have your lawyer look into the details with you to ensure that the provisions are going to hold legally in court, then print the documents or share digitally with the other party to move forward in your business transaction.