A Letter of Intent is written before a formal written agreement signed. It expresses the intent of the parties to enter into a contract and lays out the terms in broad strokes. As such, it ensures that the parties have the same understanding of the terms and conditions and signifies their commitment to complete the deal. Generally, a Letter of Intent provides that the parties agree to refrain from entertaining any offers from anyone else, or from discussing with anyone else the subject matter of the letter of intent. It is, therefore, a good idea to sign a Non-Disclosure and Non-Compete Agreement at the same time.

A Letter of Intent is not, of itself, a legal contract and is not legally binding, except as it relates to the negotiations between the parties. As such, each party can break off the negotiations at any time for any reason. However, in many instances, the parties agree that the one to break off negotiations will pay a “break-up fee” to the other party, unless the other party caused the break off.