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Contract Letter of Intent Template
Contract Letter of Intent Template
Contracts
Letters of Intent
BY JOSEPH VALOF
The letter of intent can provide the business person with a vital bridge between mere
discussions and a binding contract. However, the huge damages award under the
infamous Pennzoil v. Texaco case of the last decade demonstrated some of the pitfalls
inherent in this commonly used business tool. The following should help your company
to avoid those pitfalls.
Purpose
Drafting Issues
In one recent case, the letter of intent clearly stated: “This letter of intent is not intended
to create, nor do you or we presently have any binding legal obligation whatever ” But,
in the very next paragraph the following statement was made: “[H]owever, it is
our intention, and we understand, your intention immediately to proceed in good faith
in the negotiation of such binding definitive agreement.” Schwanbeck v. Federal Mogul
Corp., 412 Mass 703 (1992). The court held that the word “however” coupled with the
intention to “proceed in good faith” created an obligation independent to the sweeping
disclaimer that the letter of intent was nonbinding.
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2/24/2017 Contracts: Letters of Intent
The following might serve as a guide for your own letters of intent:
Purchaser intends to purchase, and XYZ intends to sell certain computer hardware. The
purpose of this Letter of Intent is to summarize our discussions to date and to confirm
our respective intentions with respect to the proposed transaction, as follows:
Purchaser intends to purchase the Model 100 Computer from XYZ for the lower
of
$10,000 or whatever better price XYZ is able to extend to Purchaser.
Purchaser has paid a $1,000 deposit to XYZ, which shall be promptly refunded
in the event negotiations are terminated for any reason.
Purchaser and XYZ intend to conclude a binding agreement on or before January
30, 1996. In the event that a contract is not signed on or before such date for any
reason or no reason, Purchaser or XYZ each shall have the right to terminate the
negotiations without liability.
This is a letter of intent only. It is not intended to be, and shall not constitute in any way
a binding or legal agreement, or impose any legal obligation or duty on either Purchaser
or XYZ, Inc. If the foregoing reflects our mutual statement of intention, please sign and
return the enclosed copy of this letter.
Sincerely,
Purchaser
Agreed:
By:
Title:
Date:
Comment: Avoid overstating your case in a letter of intent because, if you say too much, you may find y
Mr. Valof will discuss another precontract tool in our next issue, that of the “teaming agreement,” where
© ASSOCIATION OF INDEPENDENT GENERAL COUNSEL 1996; (all rights reserved). This article is not intended
as legal advice. Consult a qualified attorney for assistance concerning a specific issue or problem.
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