What does a letter of intent cost? This question is often asked by individuals entering a business agreement who need to send a letter of intent. Let’s explore this question and review general information about letters of intent and why they are used.
How Much Does a Letter of Intent Cost?
A letter of intent is a formal letter that outlines an understanding between two parties who will eventually finalize an executed contract. Letters of intent, sometimes abbreviated as “LOI,” are not legally binding documents but will often serve as an outline for a final contract that will be legally binding.
Letters of intent are often used for business or real estate transactions. For example, when one party intends to purchase a business or piece of real estate, they send the other party a letter of intent that outlines the terms and conditions of the prospective deal and highlights areas that need further negotiated.
Other purposes for letters of intent can include:
- Employment. Suppose you are interested in working with a company. In that case, you can send a letter expressing your interest in a particular position.
- Acquisition. Similar to a letter of intent to purchase a business, acquisition letters of intent will state the sender’s intentions and outline potential terms and conditions of transactions focused on acquisitions.
- Scholarship Acceptance. Students who receive academic or athletic scholarships to universities will often send a letter of intent to accept the scholarship and attend the school.
- Graduate School. Many graduate school applications require a letter of intent as part of the application process. This letter of intent would inform the university that you have submitted an application and intend on attending the school.
It is important that a letter of intent is professional and clearly states the sender’s purpose and intentions. Unfortunately, many people choose to consult with a lawyer to draft a letter of intent to ensure it is written correctly and free from mistakes.
Based on ContractsCounsel’s marketplace data, the average cost of a project involving a letter of intent is $585.00.
What’s Included in a Letter of Intent?
A letter of intent should be drafted as a formal business letter, including the date and proper business heading. In addition, the following information should be included in a letter of intent:
- Heading. The heading of a business letter must include the sender’s and recipient’s information. A proper greeting follows the heading to a specific individual or “To Whom it May Concern.”
- Subject statement. The first line of the letter of intent should clearly state the letter's purpose.
- The proposed agreement. The body of the letter should focus on the proposed agreement and outline the potential terms and conditions of the transaction. This should include pre-conditions requiring each party to produce specific documents before signing a formal contract.
- “Subject to contract.” Letters of intent are not legally binding. Therefore, every LOI should include the phrase “subject to contract” to remind both parties that these terms will only be legally binding once a formal contract is executed.
- Privacy Provisions. While letters of intent are not legally binding, they often include lawfully binding provisions to protect both parties. For example, provisions may include a standard confidentiality agreement, a non-solicitation agreement, or an exclusivity agreement.
- Professional Closing. The letter should end with a professional closing and a signature from the sender.
Examples of Letter of Intent Projects
Letter of Intent Drafting Services
Whether a letter of intent is for the purchase of real estate or a job application, this document outlines the main terms of a prospective deal. Therefore, it needs to be drafted professionally and correctly.
Many people who need a letter of intent often hire an attorney for drafting services. Attorneys familiar with letters of intent will be able to draft a professional letter that clearly states the client’s position and expectations of the potential deal or transaction.
Letter of Intent Review Services
It is recommended that you have the letter reviewed by an attorney before sending it to the recipient. This is especially important if the letter of intent is for real estate or a business. Although letters of intent are not legally binding, they show a preliminary commitment and must be drafted correctly.
A lawyer will review the letter and make necessary corrections or suggestions to ensure it best represents your intentions and commitment.
Letter of Intent Drafting Cost
Hiring a lawyer to draft a letter of intent will incur legal fees. Fees usually include:
- Time to draft the letter
- Any revisions necessary
ContractsCounsel’s marketplace data shows that the average letter of intent drafting cost is $600.00 across all states.
Letter of Intent Review Cost
If you draft your letter of intent and hire a lawyer to review it, the lawyer will charge you for their time and services. The lawyer will take their time and legal expertise to review the letter and ensure it contains all necessary information.
ContractsCounsel’s marketplace data shows that the average letter of intent review cost is $450.00 across all states.
How Do Lawyers Charge for Letters of Intent?
Hourly Rates for Letters of Intent
It is common for lawyers across all legal industries to use an hourly rate fee structure to bill their clients. In the fee agreement, the lawyer will provide the client with their hourly rate and then track their time working on a case.
Once the legal services have ended, the lawyer will bill the client for the total number of hours spent on the case. Under this fee agreement, clients won’t know the total cost of legal fees until after the completion of the project. This can make budgeting difficult if the client has concerns about legal fees to maintain good communication with the lawyer to receive updates on their bill.
The marketplace data for ContractsCounsel shows that the average hourly rate for a business lawyer ranges from $200 - $350 per hour.
Flat Fee Rates for Letters of Intent
Lawyers hired for a specific legal project, like drafting a letter of intent, will often forgo hourly rate fee structures and instead use a flat rate structure. This is a more straightforward way of billing clients for legal projects.
Under a flat fee rate structure, the attorney will assess the task and then quote the client a fee for legal services. This fee usually encompasses all work that needs to be done to complete the project. Still, the client should ask about any additional charges for work that may not be included.
Clients benefit from flat rate fees because they know exactly how much legal services will cost for their project. In addition, lawyers benefit by receiving payment for the work upfront, avoiding tracking their hours, and sending clients multiple bills.
ContractsCounsel's marketplace data shows that a lease-purchase agreement's average flat fee rate is $585.00.
Get Help with a Letter of Intent
Do you need help with a letter of intent project? If so, post a project in ContractsCounsel’s marketplace to receive flat fee bids from business lawyers to handle your project. All lawyers on the ContractsCounsel’s platform are vetted by our team to make sure you are provided with top tier service.