A party that has signed a letter of intent (LOI) may be legally bound to honor it depending on how the letter is drafted. In a business-to-business transaction, a letter of intent normally contains a provision stating that the letter is non-binding. Even if such l🔯anguage is not included, it is possible a court would rule that the le🍬tter is only an expression of intent. On the other hand, the parties to a letter of intent should not rely on assumptions: Strong non-binding language is recommended.

How Courts Interpret Letters of Intent

A court relies on two factors when determining if a letter of intent is binding: written expressions of int♓ent present in the letter and demonstrative actions taken by both parties after the letter of intent is signed. If the letter is treated as a contract, it could be ruled binding.

It is also important to understand the relationship between the two parties. If two parties draft and sign an 澳洲幸运5开奖号码历史查询:ambiguous letter of intent bu🐽t have a history of non-binding agreements together, it is likely the court will rule the most recent letter as also being non-binding.

Business etiquette and protocol can be a determining factor. For example, most 澳洲幸运5开奖号码历史查询:mergers and acquisitions begin in earnest with a 澳洲幸运5开奖号码历史查询:term sheet, which functions as a letter of intent. The term sheet states the intentions, purchase price, and payment terms. However, term sheets are almost always non-binding. Courtsℱ will likely take this precedent into consideration.

When a Letter of Intent Is Non-Binding

Suppose a letter of intent is non-binding but one company incurs costs or devotes resources only to eventually have the deal fall through. In many cases, there is no recourse for losses incurred. However, it is possible that the breaching party cou🅺ld be found to have failed to negot✨iate in good faith.

Th𒈔ese laws are ambiguous and likely depend on the jurisdiction and the type of letter of intent.

For example, in 2012, the Delaware Supreme Court approved recovery of "benefit of the bargain" damages between two companies in a mergers and acquisitions deal in the case of SIGA Technologies, Inc., v. PharmAthene, Inc.

Other Uses for a Letter of Intent

Beyond the business world, letters of intent are used by individuals seeking government grants and by some people applying to colleges, such as varsity athletes, who want to state their commitment to attend a certain school.

In some cases, a letter of intent can be used by a parent to specify their wishes for the care and wellbeing of minor children should the parent die. In this case, they are not considered legally binding, such as a will, but will sometimes be considered by family courts making determinations about the children's care.