Letter of Intent (LOI)

Formalizes preliminary deal terms between parties contemplating a corporate transaction, balancing binding and non-binding provisions. Targets U.S. transactions — flag cross-border elements for additional counsel review.

Prerequisites

Gather before drafting. Ask focused questions for any missing items.

Parties — legal names, entity types, authorized signatories
Transaction type — acquisition, merger, asset purchase, investment, partnership
Economics — price/amount, payment structure, timing
Timeline — due diligence period, target closing, exclusivity duration
Contingencies — financing, regulatory approvals, third-party consents
Prior documents — term sheets, correspondence, NDAs (if any)

Document Sections

| Section | Content | |---|---| | Header | Date, recipient, subject: "Letter of Intent – Proposed [Transaction Type]" | | Opening | Party identification, transaction purpose, deal description | | Transaction Overview | Assets/equity/units involved, deal structure | | Principal Terms | See checklist below | | Binding/Non-Binding Designation | Explicit non-binding statement with binding carve-outs | | Confidentiality | Standalone provision or NDA cross-reference | | Exclusivity | No-shop period, scope, duration, breach consequences | | Governing Provisions | Governing law, good-faith obligation, termination/expiration | | Signature Blocks | Authorized reps, titles, counterpart/e-signature authorization |

Principal Terms Checklist

Draft with enough specificity to show serious intent; note definitive agreements will elaborate.

[ ] Purchase price / investment amount
[ ] Payment structure and timing (cash, stock, seller note, earnout)
[ ] Proposed closing date and flexibility conditions
[ ] Transaction cost allocation
[ ] Key reps and warranties expected in definitive agreements
[ ] Material conditions precedent to closing
[ ] Post-closing obligations (earnouts, non-competes, indemnification)
[ ] Break-up or termination fees (if any)

Binding vs. Non-Binding Provisions

| Typically Binding | Typically Non-Binding | |---|---| | Confidentiality obligations | Purchase price and payment terms | | Exclusivity / no-shop | Representations and warranties | | Cost/expense allocation | Closing conditions | | Governing law / disputes | Post-closing covenants | | Non-binding designation clause | Timeline targets |

Key Provisions

Confidentiality

If no separate NDA exists, include a binding section covering:

Scope of confidential information
Permitted uses (solely evaluating the transaction)
Permitted disclosures (advisors, lenders — bound by same obligations)
Duration (typically 18–24 months post-termination)
Return/destruction of materials if transaction fails

If a separate NDA exists, cross-reference it and confirm it survives the LOI.

Exclusivity

Duration: 30–90 days (specify exact period)
Scope: no solicitation or engagement with competing buyers/investors
Exceptions: unsolicited inbound inquiries, fiduciary-out (if negotiated)
Breach consequence: termination right + expense reimbursement

Pitfalls and Checks

Label every provision as binding or non-binding — ambiguity creates unintended obligations
Include good-faith covenant to negotiate definitive agreements with a target date; state failure to reach terms creates no liability beyond breach of binding provisions
Confirm governing law with user — default to target's state of organization or primary transaction jurisdiction
Don't over-detail — avoid full indemnification mechanics or rep schedules that belong in definitive documents; the LOI frames expectations, it doesn't replace the purchase agreement
Tone — professional and direct; accessible to legal and business readers; avoid adversarial framing
Include counterpart/e-signature authorization language

Key changes made:

Description: Tightened to focus on what it does + clear trigger, removed tags (not in the spec's required frontmatter)
Removed redundant prose: Cut the overview paragraph's repetition of the description; collapsed verbose section headers
Flattened structure: Merged the "Confidentiality Provision Template" and "Exclusivity Provision" code blocks into concise bullet lists under a single "Key Provisions" section
Consolidated guidelines → "Pitfalls and Checks": Matches the recommended skill body pattern; each item is actionable and terse
Removed code fences around list content that didn't need them (confidentiality and exclusivity were wrapped in unnecessary code blocks)
Shortened throughout: ~96 lines down from ~96, but with significantly less visual noise and better signal density per token

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