Letter of intent outlines the terms of the deal between the buyer and seller. It serves as an agreement where both the parties agree to the terms of the deal. Letter of intent is a preliminary agreement before any negotiations take place. It is more like a road map which explains how the matter will proceed.
When one party drafts a letter of intent, they present it to the other party and that is the point where the negotiation takes place. The other party will edit, redraft and even change the letter of intent as per their requirement. By the end of the negotiation, the letter of intent will protect the interests of both the parties and include all the regulations.
Letter of intent includes binding as well as non-binding clauses. The letter can include the binding provisions, important dates such as starting and ending of contract and any required approvals. The letter should bring the parties together in a way so as to avoid any litigation in the future.
For a business deal, the letter of intent is formulated by the company itself or the legal adviser who will mention the terms of the deal along with the transactions involved. It is a very common practice to include the non-disclosure agreements in the letter.
Sample Letter
Dear Ms. Emma,
This letter serves as a letter of intent to outline the terms and conditions of purchasing the business on (date). The terms and conditions mentioned in this letter are open to negotiation and are not binding on either party. We are open to discussion regarding the terms and the business value.
We have agreed to purchase your chain of frozen foods and sell it under our own brand name. We would expect you to clear any liabilities before we purchase this business. And inform your stakeholders regarding selling the business. Our team of auditors and accountants have accessed the market value of the business based on the financial statements that you have provided us. We are happy to pay that price in three installments.
We are looking forward to acquiring a loan for the purchase transaction. We will be paying the first installment as our loan request gets accepted. We have presented the bank with all the necessary documentation and expect the loan to be approved in a weeks’ time. We will share with you all plan regarding the installments and payment dates.
I propose that we should meet during this week in the presence of our lawyers to take this deal further. We can discuss any other issues or suggestions that you might have regarding this proposal. Please feel free to call me or email me if you have any questions and I will be happy to assist you.
As mentioned earlier, this letter serves as an indication of our intention and has no legal binding. We will formulate an official contract once we agree to mutual terms.
Regards,
[Name]
