What not to do in a letter of intent?
Asked by: Mattie Hartmann | Last update: February 19, 2026Score: 4.9/5 (12 votes)
In a Letter of Intent (LOI), don't be vague, overly detailed, or use binding language like "shall" or "agreement," as this can accidentally create an enforceable contract; avoid promising specific financials or terms that aren't finalized, don't omit crucial binding clauses (like exclusivity or confidentiality), and never treat it as a mere formality, as it's a strategic document that sets the deal's framework, requiring precise wording and clarity on what's binding versus non-binding.
What should you avoid in a letter of intent?
Here are four pitfalls to steer clear of.
- Ignoring the possibility of breaching the agreement. An LOI is a nonbinding document, but that doesn't mean you can treat the document casually. ...
- Overcomplicating the document. ...
- Not having the reader in mind. ...
- Using sample content from a template.
What are common mistakes in letters of intent?
The first key mistake in an LOI is over-promising and changing deal terms after signing the LOI. For example, the LOI promises a 15-mile non-compete but the purchase agreement demands 40 miles, or the LOI specifies a stock sale but you push for an asset sale.
What are the risks of using a LOI?
An LOI should balance detail and flexibility. However, overly vague terms—such as “reasonable,” “industry standard,” or “subject to further discussion”—can lead to misunderstandings and disputes. Ambiguity allows one party to reinterpret the LOI to their advantage during negotiations.
What are the risks of signing a letter of intent?
It is an expression of interest in buying your business, not a commitment to buy it. The main clause that's legally binding in an LOI is the exclusivity period. You could be sued if you market your business to other buyers, or try to make a deal to sell to a different buyer, during this buyer's exclusive review time.
Legal Insights: Letter of Intent
How serious is a letter of intent?
A Letter of Intent (LOI) is very serious, acting as a crucial, often legally significant, roadmap for a deal, even if generally non-binding overall; it demonstrates serious intent, sets key terms, and builds momentum, but can create binding obligations like exclusivity or confidentiality, leading to legal trouble if breached or poorly drafted, making legal review essential.
How legally binding is a LOI?
While it is not a legally binding document in its entirety, certain provisions within an LOI, such as confidentiality and exclusivity clauses, can carry legal weight. A LOI is often drafted and agreed upon in the early stages of the transaction, often before a due diligence has been carried out.
What are the disadvantages of a letter of intent?
One of the issues with an LOI occurs when work goes beyond the authorised scope or expiry date. While practically speaking this is understandable – everyone wants to work in good faith to keep the works progressing while the main contract is negotiated – it can lead to disputes should negotiations stall.
Can you back out after signing a letter of intent?
The Letter of Intent says “non-binding” (which means it's not a contract and either side could back out without repercussions), so what is the harm in signing? In most cases, a Letter of Intent will be, at least in part, non-binding on both parties.
Can you sue over a letter of intent?
A LOI can agree that parties will agree and execute another, more comprehensive agreement later on. If the parties don't execute that later agreement, the LOI may allow an aggrieved party to sue.
How serious is a LOI?
A Letter of Intent (LOI) is very serious, acting as a crucial, often legally significant, roadmap for a deal, even if generally non-binding overall; it demonstrates serious intent, sets key terms, and builds momentum, but can create binding obligations like exclusivity or confidentiality, leading to legal trouble if breached or poorly drafted, making legal review essential.
What are 5 common cover letter mistakes?
5 Common Cover Letter Mistakes and How to Avoid Them
- Using a Generic Template Without Customization. ...
- Focusing Too Much on Yourself Instead of the Employer. ...
- Overloading the Letter with Irrelevant Details. ...
- Failing to Proofread for Typos and Errors. ...
- Ignoring the Importance of a Strong Conclusion.
What makes a strong letter of intent?
The purpose of an academic letter of intent is to: Demonstrate the applicant's enthusiasm for the program. Spotlight relevant academic achievements. Outline how they plan to contribute to the academic community.
What should be avoided when writing a letter?
9 Common Letter-Writing Mistakes to Avoid at All Costs | Carlton...
- Mistake #1: A long cover letter. ...
- Mistake #2: Too much or too little formality. ...
- Mistake #3: All caps. ...
- Mistake #4: Flowery, complicated, or abstract language. ...
- Mistake #5: Needless words. ...
- Mistake #6: Poor punctuation, grammatical errors, and typos.
How legal is a letter of intent?
While parties to a deal do not normally intend LOIs to be legally binding, a court may impose legal liability on either party based on the LOI under certain circumstances. If the deal doesn't go through, a letter of intent may have negative business consequences for the selling business/company.
Who signs LOI first?
Who Initiates a Letter of Intent and Who Signs it? A buyer will typically initiate a letter of intent. They may get assistance from their attorney in drafting the letter of intent. Once both the buyer and seller have come to agreement on the terms in the LOI, both the seller and the buyer will sign it.
Does a letter of intent hold up in court?
Even a document labeled “letter of intent” (LOI) may be enforced by a court of law as a binding, enforceable agreement if the court determines that the parties intended the document in question to be a binding agreement at the time it is signed.
What's a good closing sentence for a letter?
Common ways to end a letter include “Sincerely,” “Respectfully,” “Regards,” “Best,” and “Appreciatively.” Effective formal letter closings are polite, professional, and clear. They are generally used to express appreciation, respect, or goodwill toward your recipient.
Can I reject a letter of intent?
When you don't agree with the terms a buyer lays out in a letter of intent (LOI), you can reject the offer permanently or ask them to edit it. Likewise, if you initially accept an LOI but the terms no longer satisfy you, you can cancel an LOI and entertain other offers again.
What not to write in a letter of intent?
Not defining the binding and nonbinding elements
An LOI should differentiate between the binding and nonbinding terms. As an example, the following provisions in the letter of intent should fall under the binding terms: The exclusivity period or length of the due diligence.
What are the risks of LOI?
Letters of intent often create legal uncertainty
Poor drafting can blur contract boundaries and trigger disputes.
Who usually signs a letter of intent?
Letters of intent are contracts in themselves, and can have serious consequences. A letter of intent is typically used by a buyer or renter to show that he or she is serious about the deal, and to tie up the property and keep it from “getting away” for a period of time while the two sides negotiate in good faith.
Do I need a lawyer for a letter of intent?
While an LOI may appear to be a preliminary and informal step, signing it without consulting a lawyer can lead to unintended consequences and missed opportunities for negotiation.
How long is a letter of intent valid?
Typically, the terms outlined in Letters of Intent indicate the length of validity for the offer they represent. This validity period can range from 72 hours to two weeks or be linked to specific events, depending on the party making the offer.
Can you decommit after signing a LOI?
After signing an LOI, it is possible to break that promise if you cannot agree on the particulars of the deal; however, it is not advisable to do so in most situations.