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Are Letters of Intent Binding?


Yes and no. Some provisions in a letter of intent should be binding, while others should not, and the letter of intent should clearly indicate which are which.


Letter of intent provisions that should be binding are those dealing with exclusivity/no shop, due diligence, conduct of the business in the normal course before closing, and confidentiality.


All other provisions of the letter of intent should be non-binding.


Beware that if all the provisions of the letter of intent are binding (and I've seen this attempted), then you've created a poorly drafted purchase agreement, not a letter of intent. Conversely, if none of the provisions are binding, then the letter of intent doesn't accomplish what it is supposed to.


If you need help with your letter of intent, please contact me at joel@jalawoffice.com.

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