Letter of Intent

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Letter of Intent Generator

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Signature Requirements

E-Signature Valid

Letters of intent are valid with electronic signatures under ESIGN/UETA.

Sample Letter of Intent Generated by Legal Tank

Letter of Intent

Parties

1.1

This Letter of Intent ("LOI") is submitted by [____________] ("Buyer") to [____________] ("Seller") to set forth the principal terms upon which Buyer proposes to [acquire / invest in] Seller.

Transaction Overview

2.1

Buyer proposes to [acquire all outstanding equity interests / purchase substantially all assets / make an investment of $__________ for _____% equity] of Seller (the "Transaction"), structured as a [stock purchase / asset purchase / merger / equity investment].

Key Terms

3.1

Purchase Price / Valuation: [$__________], subject to customary adjustments for working capital, debt, and cash. Consideration: [cash / stock / combination / earnout up to $__________ based on ____________]. Key employees to be retained under employment agreements. Non-compete: Seller's principals for [______] years.

Due Diligence

4.1

Buyer shall have [______] days to conduct due diligence including review of financials, tax returns, contracts, IP, litigation, compliance, and employee matters. Seller shall provide reasonable access to books, records, premises, and personnel.

View all 10 sections

Exclusivity

5.1

For [______] days from the date hereof (the "Exclusivity Period"), Seller shall not solicit, encourage, or enter into negotiations with any third party regarding any competing transaction. This provision is binding.

Confidentiality

6.1

Each party shall maintain the confidentiality of the proposed Transaction and all information exchanged. No public announcements without mutual written consent. This provision is binding and survives for [two (2)] years.

Non-Binding Provisions

7.1

Except for Exclusivity, Confidentiality, Expenses, and Governing Law, this LOI is non-binding. The Transaction is subject to: (a) satisfactory due diligence; (b) definitive agreements; (c) Board approvals; and (d) required regulatory approvals.

Expenses

8.1

Each party shall bear its own expenses including attorneys' and accountants' fees. This provision is binding. [If applicable: Break-up fee of $__________ payable by Seller if Seller accepts a competing offer during the Exclusivity Period.]

Expiration

9.1

This LOI expires if not executed by Seller on or before [____________]. Execution signifies agreement to the binding provisions and intent to negotiate in good faith, but does not obligate either party to consummate the Transaction.

Governing Law

10.1

This LOI shall be governed by the laws of the State of [_____________]. Binding provisions survive until the earlier of: execution of definitive agreements, expiration of specified time periods, or written termination by either party.

What Is a Letter of Intent?

A letter of intent (LOI) is a written document that records the key terms two parties have agreed upon in principle before they negotiate and sign a definitive agreement. It is most common at the start of a business acquisition, real estate purchase, investment, joint venture, or franchise deal, where it confirms that the parties are serious, frames the structure and price of the transaction, and sets the ground rules for the diligence and drafting process that follows. The LOI is the bridge between a handshake and a binding contract: detailed enough to align expectations, but deliberately incomplete because the final terms depend on due diligence and further negotiation.

The defining feature of an LOI is that it is usually a hybrid of binding and non-binding provisions. The substantive deal terms, such as the purchase price, deal structure, and closing conditions, are typically expressed as non-binding statements of intent, meaning neither party is legally obligated to complete the transaction. A handful of provisions, however, are commonly written to be binding the moment the LOI is signed: confidentiality, an exclusivity or no-shop period, allocation of expenses, and the governing law clause. A well-drafted LOI states explicitly which provisions are binding and which are not, because that label, not the title of the document, controls how a court will treat it.

An LOI is closely related to a memorandum of understanding (MOU) and a term sheet. The three documents serve the same function, documenting preliminary agreement on key terms, and the differences are largely a matter of custom: an LOI and term sheet are more common in M&A and commercial transactions, while an MOU is more common in government, nonprofit, and international settings. A term sheet presents the terms in a bulleted, chart-like format, whereas an LOI is written as a formal letter from one party to the other. Regardless of the label, the legal effect turns on the specific language used.

Because an LOI sits between negotiation and contract, courts analyze it carefully. Under the preliminary-agreement framework many jurisdictions follow, a document the parties intended as a non-binding outline will not be enforced as a contract, but one that contains all the essential terms and shows an intent to be bound can be enforced even though it is labeled a letter of intent. Courts also enforce the provisions the parties clearly meant to be binding, such as exclusivity and confidentiality, even when the overall deal falls through. Clear drafting, an express statement of what is and is not binding, and a good-faith negotiation clause are what keep an LOI doing its job without accidentally becoming the deal itself.

Why You Need a Letter of Intent

A buyer and seller have reached preliminary agreement on a business acquisition or asset purchase and need to document the key terms before investing in due diligence and drafting a definitive agreement.

You are negotiating a commercial real estate lease or purchase and the landlord or seller requires an LOI before proceeding to a formal commercial lease agreement.

Two companies are exploring a joint venture or strategic partnership and need to outline the proposed structure, contributions, and objectives before committing to a binding partnership agreement.

An investor wants to lock in an exclusive negotiation period and confidentiality obligations while conducting diligence, without yet committing to fund the investment.

An employer and candidate want to outline the role, compensation, and start date of a potential offer as a precursor to a formal employment agreement.

Key Sections in a Letter of Intent

Parties and Transaction Overview

Identifies the parties (for an acquisition, the proposed buyer and seller) and summarizes the proposed deal: what is being acquired, sold, invested in, or partnered on, and the structure, such as a stock purchase, asset purchase, merger, lease, or equity investment. This section frames everything that follows and should match how the parties are named in the eventual definitive agreement.

Key Business Terms

States the material economic terms agreed in principle: the proposed purchase price or investment amount, the form of consideration (cash, stock, earn-out, or a combination), any working-capital or debt adjustments, retention of key employees, and non-compete expectations. These terms are almost always non-binding, signaling the intended shape of the deal without committing either side to close.

Binding vs. Non-Binding Provisions

The most important section of any LOI. It expressly designates which provisions are legally binding (commonly confidentiality, exclusivity, expense allocation, and governing law) and states that all other provisions are non-binding expressions of intent. Without this clear designation, a court may treat substantive terms as an enforceable preliminary agreement.

Exclusivity / No-Shop Period

A binding clause granting the buyer or investor an exclusive negotiation window, typically 30 to 90 days, during which the seller cannot solicit, encourage, or negotiate competing offers. Exclusivity protects the buyer's investment of time and money in due diligence and is one of the main reasons sellers sign an LOI rather than continuing open-ended talks.

Due Diligence and Confidentiality

Sets the period during which the buyer may review financials, contracts, intellectual property, litigation, and other records, and obligates the seller to provide reasonable access. The confidentiality provision, usually binding, requires both sides to protect the existence of the deal and any information exchanged, often surviving for a year or two after the LOI ends.

Expiration, Expenses, and Governing Law

Establishes the date by which a definitive agreement must be signed or the LOI expires, how transaction expenses are allocated (commonly, each party bears its own), any break-up fee, and the state whose law governs the binding provisions. These closing mechanics determine how long the binding obligations last and how disputes about them are resolved.

Letter of Intent Legal Requirements

An LOI should expressly identify which provisions are binding (commonly confidentiality, exclusivity, expense allocation, and governing law) and state that the remaining provisions are non-binding, because the binding effect is determined by the language used, not the title of the document.

Binding provisions within an LOI must satisfy ordinary contract requirements, including mutual assent and consideration, to be enforceable as standalone obligations even if the larger transaction never closes.

A letter of intent that contains all the essential terms of the deal and shows the parties intended to be bound can be enforced as a binding preliminary agreement under the law of many jurisdictions, so non-binding language should be explicit where the parties do not intend commitment.

Many LOIs include a good-faith negotiation obligation; some jurisdictions will enforce a duty to negotiate the definitive agreement in good faith even where the substantive terms remain non-binding.

An LOI is generally valid with electronic signatures under the federal ESIGN Act and state UETA, and ordinarily requires no notarization or witnesses to be effective.

Common Letter of Intent Mistakes to Avoid

Failing to state clearly which provisions are binding and which are not, which is the single most common way an LOI is unintentionally enforced as a binding preliminary agreement for the entire deal.

Including so much detail and definitive language that the LOI contains every essential term, allowing a court to conclude the parties intended to be bound even though they called the document a letter of intent.

Omitting an exclusivity or no-shop clause, leaving the buyer exposed to a seller who uses the buyer's offer to shop for a better one while the buyer spends money on due diligence.

Leaving out an expiration date, so the LOI and its binding exclusivity and confidentiality obligations linger indefinitely with no clear endpoint.

Treating the LOI as the finish line rather than a roadmap, and then skipping or rushing the definitive agreement where the detailed representations, warranties, and indemnities actually live.

Frequently Asked Questions About Letter of Intents

What is a letter of intent?
A letter of intent (LOI) is a written document that records the key terms two parties have agreed upon in principle before they negotiate and sign a definitive agreement. It is most common at the start of a business acquisition, real estate purchase, investment, or partnership, where it confirms the parties are serious, outlines the proposed price and structure, and sets the ground rules, such as exclusivity and confidentiality, for the diligence and drafting that follow. Most LOIs combine non-binding deal terms with a few binding provisions, serving as a roadmap toward the final contract rather than the contract itself.
Is a letter of intent legally binding?
An LOI is typically a mix of binding and non-binding provisions. The substantive deal terms, such as price, structure, and closing conditions, are usually non-binding, meaning neither party is obligated to complete the transaction. Certain provisions, however, are commonly binding the moment the LOI is signed: confidentiality, exclusivity or no-shop periods, expense allocation, and governing law. Courts will enforce the binding provisions even if the overall deal collapses, and a court may even enforce an LOI as a binding contract if it contains all the essential terms and shows the parties intended to be bound. The key is clear drafting: every LOI should state explicitly which provisions are binding and which are not.
What should a letter of intent include?
A complete LOI should include: the parties and a transaction overview; the key business terms (price or investment amount, consideration, and major conditions); a clear designation of which provisions are binding and which are non-binding; an exclusivity or no-shop period; a confidentiality provision; a due diligence period and access obligations; expense allocation and any break-up fee; an expiration date by which a definitive agreement must be signed; and a governing law clause. The binding-versus-non-binding section is the most important, because it controls how a court will treat the document if a dispute arises before the definitive agreement is signed.
What is the difference between a letter of intent and a contract?
A letter of intent outlines proposed terms that the parties intend to negotiate further before signing a definitive agreement, and its substantive deal terms are usually non-binding. A contract is a fully negotiated, binding agreement that creates enforceable obligations on both sides. An LOI is signed early to confirm mutual interest and key terms, while the definitive contract follows after due diligence and detailed negotiation. Think of the LOI as the roadmap and the contract as the destination. The exception is that an LOI's clearly designated binding provisions, such as exclusivity and confidentiality, function like a contract from the moment they are signed.
Can you back out of a letter of intent?
In most cases, yes. Because the substantive deal terms of an LOI are usually non-binding, either party can generally walk away from the transaction itself before a definitive agreement is signed, particularly if due diligence is unsatisfactory or a condition is not met. What you cannot freely back out of are the provisions written to be binding: if you breach an exclusivity period by shopping the deal, disclose confidential information, or ignore an agreed expense or break-up-fee obligation, the other party can enforce those provisions and seek damages. Some LOIs also impose a duty to negotiate the definitive agreement in good faith, which a few jurisdictions will enforce.
When do you use a letter of intent?
You use an LOI once the parties have agreed in principle on the shape of a deal but before they invest in full due diligence and definitive contract drafting. It is standard in business acquisitions and asset purchases, commercial real estate transactions, investments and financings, joint ventures and partnerships, and franchise arrangements. The LOI signals commitment, frames the price and structure, and, through its binding exclusivity and confidentiality terms, protects each side during the negotiation period. It is most valuable when the deal is complex or high-value enough that both sides want alignment, and protection, before spending significant time and money.
What is the difference between an LOI and an MOU?
The terms are often used interchangeably and serve the same function: documenting preliminary agreement on key terms before a definitive agreement is drafted. In practice, a letter of intent is more common in M&A and commercial transactions, while a memorandum of understanding is more common in government, nonprofit, and international contexts. An LOI is usually written as a formal letter from one party to the other, while an MOU often reads as a mutual statement between the parties. As with an LOI, the legal effect of an MOU depends on the specific language used, not the title of the document.
How do I write a letter of intent for a business?
Start by summarizing the proposed transaction in plain language: who is buying, selling, investing, or partnering, what is being transacted, and the intended structure. Next, outline the key terms, such as the proposed price, consideration, due diligence period, and closing conditions, as non-binding expressions of intent. Then designate the binding provisions clearly, typically confidentiality, exclusivity, and expense allocation, and add a general statement that all other terms are non-binding. Include an expiration date and a governing law clause, then have both parties sign. The binding exclusivity period begins on signing, and the buyer usually starts due diligence while attorneys draft the definitive agreement.

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