Term Sheets and Letters of Intent

05.05.2017

Wondering about letters of intent (LOIs)? If you ultimately do not want to go through with the transaction that the LOI describes, no harm done, right? Not so fast. There are cases where a court has said that a LOI is binding, meaning that the parties must go through with the transaction described in the LOI – even if one of the parties doesn’t want to. It’s all in the language of the LOI, so if you are contemplating a LOI for any type of a business relationship, investment or merger, be sure to have the LOI checked for proper language. That way you minimize your risk of potentially being forced to do the transaction if you later realize that it is not in your company’s best interests. The language needs to be very clear about the non-binding nature of the LOI.