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A letter of intent establishes that parties intend to reach an agreement, such as an acquisition or collaboration. There is no definitive contract yet, but the statement provides clarity, structure, and—in certain aspects—binding agreements. Four reasons to draft one.
1. Document that you are negotiating seriously
With a letter of intent, parties establish that they are entering into negotiations with the intention of reaching an agreement, such as an acquisition agreement or an SLA. This gives both sides the reassurance that the other is serious, while there is no definitive obligation yet.
2. A clear framework for the negotiations
The statement outlines the main points and starting points: what the intended deal is about, which points still need to be worked out, and what process are you following? This prevents misunderstandings and keeps the negotiations structured and efficient.
3. Binding agreements where necessary
Although most components are non-binding, you can make certain agreements binding, such as confidentiality, exclusivity (negotiating only with each other), and the division of costs. This protects sensitive information and your negotiating position during the process.
4. Safety net if the deal falls through
If an agreement is ultimately not reached, it is clear that no obligation existed yet, provided this is properly formulated. At the same time, the binding parts (such as confidentiality) remain in effect. A well-drafted letter of intent thus prevents disputes regarding what was and was not agreed upon.
Frequently Asked Questions
Is a letter of intent binding?
Usually largely not, but elements such as confidentiality, exclusivity, and cost sharing can be binding. Clarify the status of each point.
What do I use a letter of intent for?
To establish the outlines and trajectory for a proposed acquisition, collaboration, or major deal prior to the final contract.
What is the difference compared to a definitive contract?
With a letter of intent, there is not yet a binding agreement regarding the entire deal; in principle, parties can still withdraw, except for the binding parts.
Have a letter of intent drawn up?
Our legal experts draft a letter of intent . View our contract law team or schedule a free consultation .
