Question 1

Is a letter of intent legally binding?

Accepted Answer

Usually not — most LOIs explicitly state they're non-binding. But some provisions within the LOI (like confidentiality, exclusivity periods, and expense-sharing) can be binding. The language matters: if your LOI says 'the parties agree to' instead of 'the parties intend to,' a court might find it binding.

Question 2

Do I need a letter of intent before a contract?

Accepted Answer

For major deals, yes — it saves time and money. An LOI ensures both sides agree on the big-picture terms before spending thousands on legal fees to draft a definitive agreement. For smaller deals, you can skip the LOI and go straight to the contract.

Question 3

What should a letter of intent include?

Accepted Answer

The key deal terms: price, payment structure, timeline, major conditions, and a clear statement about which provisions are binding. Include a confidentiality obligation, an exclusivity period (if applicable), and an expiration date for the LOI itself.

Question 4

Can I walk away after signing a letter of intent?

Accepted Answer

From the non-binding portions, yes. That's the point of keeping the LOI non-binding — it lets you negotiate without commitment. But you can't walk away from binding provisions like confidentiality or exclusivity, and a court could hold you liable if you negotiated in bad faith.

Question 5

What happens if we sign an LOI but never finalize the contract?

Accepted Answer

The deal dies. Non-binding LOI provisions expire. Binding provisions (confidentiality, non-solicitation) survive. In rare cases, if both parties acted as though the LOI was the final agreement — exchanging money, starting work — a court might find an implied contract exists.

Letter of Intent

Definition

In Practice

Common in these contract types

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Frequently asked questions about letter of intent

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