Letter of Intent
A letter of intent puts a handshake on paper before anyone spends money on lawyers. It says what the two sides have agreed in principle, what still has to be worked out, and how long the other party has to decide. Written well, it moves a deal forward. Written carelessly, it accidentally becomes the deal.
The clause that turns a maybe into a contract
Most people write a letter of intent believing it commits them to nothing. That belief is wrong often enough to matter. Courts across the United States have repeatedly enforced letters of intent that read like final agreements — because the document named a price, named a closing date, described exactly what was being sold, and never once said it was non-binding. Intent is judged by what the paper says, not by what the writer assumed. The fix is one paragraph, and it is the paragraph most templates leave out.
What the template covers
It separates what binds from what does not
Almost every letter of intent is a hybrid. The commercial terms — price, structure, timeline — are meant as a starting point. But confidentiality, exclusivity, who pays their own costs, and which state law governs are usually meant to bind from the day it is signed. Our template keeps those two groups visibly apart, so nobody has to argue later about which was which.
It sets a deadline that actually expires
A letter of intent with no expiry is an option the other side holds for free. Ours carries an expiry date and states plainly what happens when it passes: the terms lapse and neither side owes the other anything. That single line is what stops a buyer from sitting on your business for four months while they shop around.
It records exclusivity in writing
If you have agreed to stop talking to other buyers, that promise is worth writing down with its own end date. If you have not agreed to that, the document should say so — otherwise the other side may believe you did, and behave accordingly.
It survives the deal falling apart
Roughly half of all letters of intent never become contracts. What matters then is that the confidentiality clause outlives the negotiation, so the numbers you disclosed do not travel to a competitor. Ours states its own survival period rather than going quiet on the point.
What makes it enforceable
There is no federal statute governing letters of intent; enforceability is decided under the contract law of the state you name. What is settled is the signature: the Electronic Signatures in Global and National Commerce Act, 15 U.S.C. § 7001, provides that a signature, contract or record may not be denied legal effect solely because it is in electronic form. Every state except New York has also adopted the Uniform Electronic Transactions Act; New York reaches the same result through its Electronic Signatures and Records Act, State Technology Law § 304. So the question is never whether your electronic signature counts — it is whether the words above it say what you meant.
A seller who nearly gave away four months
A founder agreed to sell a small logistics company and signed a two-page letter of intent the buyer sent over. It named a price, a structure, and a diligence period — and said nothing about exclusivity or expiry. The buyer took eleven weeks, renegotiated down twice, and walked. The founder had turned away two other approaches during that period because she believed the letter obliged her to. It did not. It also did not oblige the buyer to anything. The document she should have signed was the same length, with two more paragraphs.
Questions people ask about this
Is a letter of intent legally binding?
Usually only in part. The commercial terms are normally non-binding until a definitive agreement is signed, while confidentiality, exclusivity, cost allocation and governing law are normally intended to bind immediately. What decides it is the wording, not the label — a document titled "non-binding" that reads like a contract has been enforced as one.
What is the difference between an LOI and a term sheet?
In practice, very little. A term sheet is usually a bulleted list of commercial terms, common in investment deals; a letter of intent is written as a letter and is more common in acquisitions and real estate. Both carry the same legal risk if they omit the binding/non-binding split.
Do both parties have to sign it?
A letter of intent signed by only one side is an offer, not an understanding. Countersignature is what turns it into a shared record — and is what makes the confidentiality and exclusivity clauses enforceable against the other party.
How long should a letter of intent stay open?
Long enough for real diligence, short enough that it costs the other side something to stall. Thirty to sixty days is common for a small business sale; two weeks is common in residential real estate. The number matters less than having one.