Letter of Intent to Purchase

Clients Rate Lawyers on our Platform 4.9/5 Stars
based on 2,009 reviews

Jump to Section

Need help with a legal contract?

CREATE A FREE PROJECT POSTING
Post Project Now

What is a Letter of Intent to Purchase?

A letter of intent to purchase is a written document detailing a buyer’s intent to purchase a seller’s product, assets, or services. It’s used to establish and indicate an understanding between two or more parties which provides the basis for a future or proposed agreement.

Negotiations don't need to be completed for you to draft a letter of intent to purchase. It’s an agreement to agree between a prospective buyer and a seller. A letter of intent to purchase precedes the more formal and detailed purchase agreement.

A letter of intent to purchase is also known as an LOI. Some terms used to refer to a letter of intent include:

  • Terms sheet
  • Framework letter
  • Letter of interest
  • Intent to purchase letter
  • Assurance letter

Benefits of Using a Letter of Intent to Purchase

A letter of intent to purchase allows the parties to focus on the essential terms of the agreement without prematurely negotiating the specific legal terms. Some of the advantages of using a letter of intent to purchase include:

  • Provides a clear indication of the timeframe for concluding the negotiations and completing the broader transaction.
  • Communicates and documents your preferences.
  • Outlines the terms and structure of the deal.
  • Identifies key issues or conditions that allow parties to back out of the deal.
  • Prevents negotiating parties from engaging with others during the early stages of the negotiation process.
Meet some lawyers on our platform

Jane C.

66 projects on CC
View Profile

Kelvin R.

5 projects on CC
View Profile

Sunnita B.

4 projects on CC
View Profile

Scott S.

9 projects on CC
View Profile

Is a Letter of Intent to Purchase Binding?

Because letters of intent to purchase are not contracts, always sign a legally enforceable agreement before completing work or providing services under the terms outlined in your letter of intent. However, if appropriately drafted, a letter of intent to purchase can ensure certain parts of the agreement are binding – while others are not.

The binding parts of a letter of intent include:

  • Terms of non-solicitation : This prevents both parties from targeting each other's employees.
  • Confidentiality : This ensures legally enforceable obligations towards privacy for both parties.
  • Exclusivity and negotiation : This stops both parties from negotiating with each other for a reasonable period, thus offering an incentive for parties to complete their negotiations promptly.

It’s helpful to include a clear statement that parties do not intend to be bound until a definitive agreement is executed and delivered to minimize the risk of an enforced non-binding agreement.

While a letter of intent to purchase is not legally binding, it helps lay the groundwork for the official legally binding purchase agreement.

ContractsCounsel Letter of Intent To Purchase Image

Image via Pexels by Andrea Piacquadio

Types of Purchase Letters of Intent

  • Letter of Intent to Purchase Real Estate, Business, or General Property : A letter of intent can be used to state your intention to purchase commercial or residential property or a business. The letter should note that it isn't an official purchase agreement. Instead, the terms and conditions of the business deal will be stated in the actual purchase agreement – and must be agreed upon by all parties.
  • Letter of Intent for Acquisition of a Business: This letter of intent is similar to when purchasing a business. In this one, however, it should be marked “confidential.” You may want to include the deal's basic terms and a nonbinding statement.

What Should be Included in a Letter of Intent to Purchase?

The letter of intent to purchase should include:

  • Information about both the buyer and seller
  • The timeline of the purchase
  • Purchase price
  • Payment method
  • Other details

A letter of intent to purchase covers a range of issues in the buy-sell agreement. It should include details about the agreement and a projected date for completing and signing the purchase agreement.

A letter of intent can cover the main obligations of both the buyer and seller and specify who is responsible for producing the first draft of the agreement. Letters of intent can also mention any pre-conditions to signing the contract. This area is broad and may include producing critical documents or exercising due diligence.

How to Write a Letter of Intent to Purchase

Writing a letter of intent to purchase and even a term sheet will require legal expertise. To avoid any costly mistakes, consult with a lawyer to have them review your letter of intent or draft one for your transaction.

If you wish to create your own letter of intent to purchase, here’s how:

  1. Identify all parties involved. List all owners included in the public record.
  2. Use any legal business names if you are entering a business purchase agreement. Provide the house address and unit numbers if the property has multiple units.
  3. Write the price you agree upon.
  4. Include the deposit, down payment, and loan type.
  5. State how you intend to pay for the purchase.
  6. Set deadlines for inspections and seller disclosures.
  7. List information you need from the seller, like homeowners’ association documents or rental agreements if there are tenants in the home.
  8. Identify your broker if you are purchasing real estate.
  9. Set the date on which you want to take possession or ownership.
  10. Include contingencies.
  11. Review carefully. Make sure you agree to the terms. To reiterate, it’s always best to have an attorney or legal professional review documents before signing.
  12. Sign the letter with your personal or business name and include space for the seller to acknowledge your letter of intent and the date of acceptance.

Conditional language is often added, such as “This Letter of Intent shall be non-binding until a more formal purchase agreement is signed.” However, just because this language is used, it doesn’t mean any party can just walk away from the sale. Instead, a contract is still formed.

It’s important to know that numerous contingencies can be placed in a letter of intent that will protect a buyer. Some examples include a review of the seller’s books and records, lining up suitable financing, reviewing and acceptance by the buyer of all lease and purchase agreements, and the ability to obtain adequate and affordable insurance.

Although these are typically non-binding, there have been court cases where intent to purchase agreements have been deemed enforceable.

If you are the seller, you may be precluded from deciding at the last minute not to sign the purchase agreement if the buyer meets all the obligations outlined in the letter of intent.

Never sign a letter of intent until you are sure you are ready to proceed with the transaction.

Due to the risks associated with a letter of intent, some businesses opt to use a term sheet. It is similar to a letter of intent and cost-effective.

When Should I use a Letter of Intent to Purchase?

A letter of intent to purchase can be used when purchasing a product, services, business, assets, real estate, etc. For example, a vendor may write a letter of intent to be a supplier.

You should use a letter of intent when you want to propel a transaction forward. A letter of intent enables the parties to understand what they are getting into before entering a binding buy-sell agreement.

It helps all parties assess risks and rewards before spending too much time and money on an agreement that may not be beneficial. In addition, it shows the seller that a buyer is serious and vice versa.

Parties should generally use a letter of intent when completing a purchase. Still, there is no set rule or criteria to follow to determine if you should for your particular transaction. Instead, consider the advantages of using an intent to purchase and the potential disadvantages.

A letter of intent lawyer or another professional advisor can offer guidance in making this decision.

Post a project in ContractsCounsel’s marketplace to receive flat fee bids from lawyers for your project. All lawyers have been vetted by our team and peer-reviewed by our customers for you to explore before hiring.

How ContractsCounsel Works
Hiring a lawyer on ContractsCounsel is easy, transparent and affordable.
1. Post a Free Project
Complete our 4-step process to provide info on what you need done.
2. Get Bids to Review
Receive flat-fee bids from lawyers in our marketplace to compare.
3. Start Your Project
Securely pay to start working with the lawyer you select.

Meet some of our Letter of Intent to Purchase Lawyers

View Scott
Member Since:
October 26, 2021

Scott S.

Attorney
Free Consultation
Get Free Proposal
New York, NY
15 Yrs Experience
Licensed in NY
Benjamin Cardozo School of Law

Scott graduated from Cardozo Law School and also has an English degree from Penn. His practice focuses on business law and contracts, with an emphasis on commercial transactions and negotiations, document drafting and review, employment, business formation, e-commerce, technology, healthcare, privacy, data security and compliance. While he's worked with large, established companies, he particularly enjoys collaborating with startups. Prior to starting his own practice in 2011, Scott worked in-house for over 5 years with businesses large and small. He also handles real estate leases, website and app Terms of Service and privacy policies, and pre- and post-nup agreements.

View Oscar
Member Since:
October 28, 2021

Oscar B.

Attorney
Free Consultation
Get Free Proposal
Saint Petersburg, FL
20 Yrs Experience
Licensed in FL
Stetson University, College of Law

Oscar is a St. Petersburg native. He is a graduate of the University of Florida and Stetson University, College of Law. A former US Army Judge Advocate, Oscar has more than 20 years of experience in Estate Planning, Real Estate, Small Business, Probate, and Asset Protection law. A native of St. Petersburg, Florida, and a second-generation Gator, he received a B.A. from the University of Florida and a J.D. from Stetson University’s College of Law. Oscar began working in real estate sales in 1994 prior to attending law school. He continued in real estate, small business law, and Asset Protection as an associate attorney with the firm on Bush, Ross, Gardner, Warren, & Rudy in 2002 before leaving to open his own practice. Oscar also held the position of Sales & Marketing Director for Ballast Point Homes separately from his law practice. He is also a licensed real estate broker and owner of a boutique real estate brokerage. As a captain in the US Army JAG Corps, he served as a Judge Advocate in the 3rd Infantry Division and then as Chief of Client Services, Schweinfurt, Germany, and Chief of Criminal Justice for the 200th MP Command, Ft. Meade, Maryland. He is a certified VA attorney representative and an active member of VARep, an organization of real estate and legal professionals dedicated to representing and educating veterans. Oscar focuses his practice on real small business and asset protection law.

View Rachael
Member Since:
October 28, 2021

Rachael D.

Attorney
Free Consultation
Get Free Proposal
New York
10 Yrs Experience
Licensed in NY
Touro Law

We help simplify every transaction and provide a superior level of customer service to create long lasting and trusted relationships with our clients. Our goal is to guide our clients with practical and zealous legal representation and eliminate the difficult nature of any legal transaction.

View Gamal
Member Since:
October 31, 2021

Gamal H.

Attorney
Free Consultation
Get Free Proposal
New York City
24 Yrs Experience
Licensed in NY
New York Law School

I am a commercial contracts attorney with twenty years of experience. I have represented major corporate clients including Amazon, Marvel, and Viacom as well as independent entertainment professionals and technology startups.

View Yoann E. A.
Member Since:
October 29, 2021

Yoann E. A. L.

Attorney
Free Consultation
Get Free Proposal
California
3 Yrs Experience
Licensed in CA
Concord Law School at Purdue University Global

For over 15 years, I accumulated both hands-on technical and business experience as an IT engineer and entrepreneur, enabling me to understand your challenges probably better than anyone else on the legal market! My California-based full-online practice focuses on: - Intellectual Property (Copyright / Trademarks) - Privacy / Data Protection - Commercial matters (e.g. service contracts) - Corporate (e.g. incorporation, restructuring)

View Melanie
Member Since:
October 31, 2021

Melanie C.

Business & Intellectual Property Attorney
Free Consultation
Get Free Proposal
NY/NJ
18 Yrs Experience
Licensed in NY
Emory University School of Law

Melanie Cunningham specializes in helping entrepreneurs remain creative and expansive by establishing the foundation of their business and protecting and maximizing their intellectual property. It’s her belief that entrepreneurs and micro and small business owners play a critical role in our communities, which propelled Melanie to return to private practice after more than a decade working for global financial institutions. Melanie’s practice is dedicated to delivering excellent legal support and protection to this vital, but an often underserved, community. Melanie credits her business training and the skills developed as a senior compliance officer with enabling her to help small business owners have a legally compliant business, while proactively advising clients during the growth process. She’s helped diverse entrepreneurs do business in a way that focuses more on collaboration than competition. Melanie has counseled small business owners in determining what is protection worthy (helping them obtain trademarks and copyrights) and making contact on their behalf in the case of infringement.

View ralph
Member Since:
October 31, 2021

ralph s.

Attorney
Free Consultation
Get Free Proposal
Gainesville FL
11 Yrs Experience
Licensed in DC, FL, MA
University of Florida Levin College of Law

Ralph graduated from University of Florida with his JD as well as an LLM in Comparative Law. He has a Master's in Law from Warsaw University , Poland (summa cum laude) and holds a diploma in English and European Law from Cambridge Board of Continuous Education. Ralph concentrates on business entity formation, both for profit and non profit and was trained in legal drafting. In his practice he primarily assists small to medium sized startups and writes tailor made contracts as he runs one of Florida disability non profits at the same time. T l Licensed. in Florida Massachusetts and Washington DC this attorney speaks Polish.

Find the best lawyer for your project

Browse Lawyers Now

Want to speak to someone?

Get in touch below and we will schedule a time to connect!

Request a call