When you're negotiating a business deal and the negotiation is getting serious, use a Letter of Intent.
A Letter of Intent (LOI) is a legal document outlining an agreement between the parties before the agreement is finalized. It helps protect rights and responsibilities of everyone involved, as well as solidifying the relationship between the parties.
The primary purpose of the letter, as its name indicates, is to formally announce one party's intentions to the corresponding party. Also referred as Letter of Interest
Use a Letter of Intent if you are ready to enter serious negotiations for the purchase or sale of a business and you would like to define the partie's intentions formally in writing.
While it's not a binding agreement, a Letter of Intent can give the parties some assurance that the deal will go through.
Read more: The Letter of Intent, Explained
See a sample template below.
Letter Of Intent
Buyer Name, Buyer Title
Buyer Company Name
Buyer Street Address
Buyer City, New York 10001
Dear Seller Name:
This letter hereby expresses the mutual interest in a transaction currently in negotiations between the following parties:
Buyer(s): Buyer Name/Company Name
Seller(s): Seller Name/Company Name
This letter will outline the general terms of a potential final agreement to be negotiated and finalized at a later date. Any and all parties signing this letter hereby affirm they are an authorized representative of their respective companies.
1. Prospective Transaction
The transaction currently under negotiation is for the transfer of 50% percent share of Company Name from the Seller(s) to the Buyer(s) ("Prospective Transaction").
The provisions in this letter of intent are informational in purpose and nonbinding on all parties unless otherwise explicitly stated within the provision. The Prospective Transaction requires further negotiation and documentation, including preparing and executing a final agreement. This letter of intent will expire on September 30, 2015 at exactly 12:00.
3. Terms of Payment
Should a final agreement be made, the Buyer(s) intend to make a payment to the Seller(s) under the following terms in return for the rights to the company or interest listed above: Buyer will make a cash payment of One Hundred Thousand Dollars and Zero Cents.
The Seller(s) hereby agree to disclose fully any liabilities or debts associated with the company or interest at hand in writing before any final agreement is executed and finalized.
All parties agree to pay their own respective expenses incident to this letter of intent, any final agreement, and any negotiations.
6. Exclusive Negotiating Rights
The Seller(s) hereby intend that the Buyer(s) have exclusive negotiating rights for the company or interest listed above for 90 days following the execution of this letter. The Seller(s) agree not to enter into any negotiations with other individuals or companies regarding the sale or transfer of the above listed company or interest without the written consent of the Buyer(s) within the next 90 days. All parties agree that the exclusive rights are in effect from the date of signing this letter of intent and are enforceable on all parties, employees, company boards, owners, executive officers and any other parties associated with their respective companies.
7. Public Announcements and Confidentiality Agreement
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