What is Letter of Intent Drafting?
A letter of intent is a document that outlines an agreement between parties who want to make it legal in the future. It’s common to use letters of intent during various situations, such as business mergers, joint ventures, and job offers. Although non-binding, a letter of intent can include some binding terms.
Since a letter of intent features the key terms of an agreement and can set the groundwork for a formal, legally-binding document, it needs to be carefully drafted.
Read the rest of this article to learn more about how letters of intent work, how to draft them, and how a lawyer can help you navigate the process for clarity and legal validity.
What Does a Letter of Intent Include?
A letter of intent usually contains the following information.
- Purpose. The letter of intent has to provide a reason for the document and what transaction is involved.
- Transaction structure. Examples of a transaction structure include asset purchases or share purchases. The letter specifies how the transaction will be paid and what legal or tax implications are included.
- Purchase price. This specifies the proposed purchase price.
- Due diligence. This outlines what responsibilities both parties have under the agreement. There should be a timeframe and scope outlined for conducting due diligence.
- Conditions for closing. There might be specific conditions that need to be met before closing the translation, such as securing financing or approvals.
- Exclusivity. This is sometimes included in a letter of intent. It prohibits a seller from negotiating with other buyers for a certain amount of time. This prevents third party interference during negotiations.
- Confidentiality. This clause specifies that information exchanged between parties must remain private and not be disclosed to others.
- Non-binding. It’s common for letters of intent to state that they are not legally binding, but there could be some clauses that are. These can include exclusivity and confidentiality clauses.
- Termination. There might be situations in which the document will be terminated, so exit strategies need to be clearly defined.
How Should You Draft a Letter of Intent?
When drafting a letter of intent, there are some important things to bear in mind so that the letter is clear, professional, and creates a framework for a formal agreement between parties.
Include a Summary
The letter of intent should include an opening paragraph that explains the potential outcome of the agreement and outlines expectations for both parties.
Identification of Parties
The parties involved in the agreement should be specified, such as their names and contact information.
Terms and Conditions
The letter must include specific terms and conditions for future negotiations between parties. These Ts and Cs can include financial or payment terms, deliverables, and other information.
Price and Payment
You want to provide clear information about the payment structure for the transaction, including timelines in which to make payments. If you’re using a letter of intent for partnerships, you’ll include information about how profits are distributed.
Timelines
To ensure both parties’ expectations are aligned, the letter of intent should specify deadlines by which milestones should be completed.
Next Steps
To be comprehensive, the letter of intent should explain what is going to happen after both parties have signed it. This could include drafting a more formal contract.
Clear Language
When drafting a letter of intent, you want to stick to simple, straightforward language. Outline the key points without providing too many details. These will come later when parties formalize legally-binding contracts. It’s also best to avoid technical language that can be confusing.
Binding vs. Non-Binding Terms
For clarity, you should provide information about which provisions in the letter of intent are binding and which ones aren’t. The binding provisions in the letter will be enforceable, even in situations where the transaction isn’t completed.
Do You Need a Lawyer to Draft a Letter of Intent?
Hiring a lawyer to draft a professional letter of intent is beneficial in many ways.
- A lawyer checks that the letter reflects both parties’ goals and expectations.
- They’ll avoid using any vague or misleading language that could result in confusion or disputes.
- They’ll check that binding clauses are legally enforceable.
- They’ll structure the letter of intent to help you with negotiations.
- They’ll consider legal or commercial risks, based on their experience with similar projects. This includes financing conditions and intellectual property (IP) concerns.
- They’ll align the letter with all relevant industry-specific regulations.
- They’ll draft all terms in the letter of intent so that they’re aligned with your business requirements and practices.
- They’ll structure the letter of intent according to your jurisdiction, as the legal enforceability and content of these documents can differ in different jurisdictions.
- They’ll protect you by ensuring all potential issues and risks are outlined early on prior to negotiations.
Where to Find a Lawyer to Draft a Letter of Intent
If you need to write a letter of intent, hiring a lawyer is a smart move to ensure it’s clear and comprehensive. You don’t have to search far and wide to find a suitable lawyer. On ContractsCounsel, one of the largest online legal marketplaces where clients connect with vetted lawyers, hiring a lawyer to draft your documents is a simple process.
You can request a project online, by going to the ContractsCounsel platform. Follow these steps:
1. Visit the ContractsCounsel marketplace.
2. Post your project or request for free. Add a few details to explain what you need.
3. You’ll receive multiple bids from lawyers on the platform.
4. Once you receive the lawyer bids, you should review the lawyers' profiles. ContractsCounsel provides lawyer information to help you choose the best lawyer, such as their location, client ratings, years of experience, and field of expertise.
5. Connect with a lawyer you think is best suited to your requirements and hire them to draft your letter of intent.
