Skip to main content


Showing posts from April 5, 2015

Focus on Letters of Intent: Useful Business Tool or the Devil's Invention?

Consider the letter of intent (also known as a "memorandum of understanding," a "preliminary agreement," or other innocuous-sounding title). Some business folks believe that a surefire way to do a deal at the last minute (and no reason to bother their lawyer at 5 PM on a Friday!) is to sign a letter of intent ("LOI"). The typical LOI is a short agreement that states some - but not all - of the terms of the deal, contemplating that the parties will eventually sign a complete or definitive agreement ("DA") that will state all of the deal's provisions, both business and legal.

LOIs are inherently troublesome (an "Invention of the Devil" according to one lawyer) because the parties to a LOI may disagree on its legal significance. One party may view the LOI as obligating the parties to sign a DA at a future date, even if a disagreement develops over the provisions in the DA that the LOI didn't address. The other party may regard the …