Letters Of Intent That Bind

While the Spice Girls may not be your first choice when seeking legal advice, it is prudent when drafting a letter of intent ("LOI") or term sheet to make sure that you tell them what you want, what you really, really want.¹

In the course of negotiating most proposed corporate transactions, the first step is for the parties to set out the agreed upon terms of the transaction in a document such as an LOI or term sheet. In many instances, these documents are made subject to entering into a more definitive agreement, often stating that the parties agree to negotiate the terms of the definitive agreement in good faith. The parties may intend for the LOI to be a binding commitment to complete the transaction, or merely a non-binding "agreement to agree". Great caution should be exercised to ensure that the intentions of the parties are clear in the LOI.