Letter of Intent

More complex business transactions are usually spread out in phases. Negotiations on these transactions are challenging and it is not always a good idea to wait for the final agreement to be made in writing, which may only be several months after the start of negotiations. In such cases, the parties may be assisted by a letter of intent or a basic agreement on the transaction framework which the parties can refer to in further more detailed negotiations.

However, pay attention to the commitments you make in the letter of intent or the commitments that the other party to the contract undertakes to make. You must critically evaluate whether the document accurately reflects what you have already (and thus bindingly) agreed to and what will be subject to further negotiations. As the old saying goes "the devil is in the details." If you do not want to be in breach of your obligations and therefore be liable for the damage caused, pay attention and insist on precise wording at each stage of your transaction, even if the other party insists that the letter of intent is actually just a non-binding proclamation.