Letter of Intent

What is a letter of intent template?

Definition and Scope

A letter of intent template is a formal communication used to express the initial intent of one party to enter into a future agreement with another. This document outlines the following important information:

• full name, address, and contact details of the parties involved;
• details of the transaction (e.g., subject agreement, fees, duration, etc.);
• duration of negotiation process;
• confidentiality obligations of the parties involved;
• date and signature.

The parties involved in a letter of intent sample are the sender and the recipient. Both parties could be individuals, businesses, or organizations that are willing to enter certain transactions or agreements. However, it is also possible that the actual names of the parties may differ. For instance, in a letter of intent to purchase business template, a sender might be referred to as a buyer, while the recipient might be referred to as a seller.

It outlines the preliminary terms, expectations, and key points of negotiation before a binding contract is signed. This document is often used during early discussions in business transactions, mergers, acquisitions, and real estate purchases to ensure both parties are aligned on the main deal structure.

Types of Letter of Intent

In practice there are a number of types of letters of intent, including:

• Letter of intent to purchase company. This is a letter by which a sender expresses their interest in purchasing shares or stocks of a certain type of company (e.g., limited liability company, S-corporation, etc.).
• Letter of intent for purchase of real property. This is a document by which a sender is willing to inform about the intent to purchase a certain type of real estate (e.g., apartment, house, commercial real estate, land plot, farm, etc.).
• Letter of intent business purchase. This document is used to acquire the business, including its assets and liabilities.

How to draft a letter of intent template?

Drafting a well-structured letter of intent template is crucial for outlining the foundation of a transaction and maintaining professional clarity during negotiations.

Proposal

A good example of a letter of intent shall include a proposal regarding the future transaction or agreement, as well as its full details.

• Letter of intent to purchase a business. The text of a letter shall include the name of a business, its registered address, and a list of all existing liabilities and assets, as well as intellectual property rights.
• Letter of intent to purchase real estate. The text of a letter shall lay out the property’s location and detailed description, including size, number of premises, third-party rights (if any), etc.
• Letter of intent to purchase company. In that case a letter normally includes the amount and type of shares to buy, the list of rights attached to the shares, and the name and registration number of a company.

Define Suggested Terms

Another important element of every letter of intent sample is to suggest terms under which the transaction or agreement shall be concluded. Those details may include:

• purchase price, payment terms, and late penalties (if any);
• suggested duties and responsibilities of the parties;
• duration;
• liability, applicable laws, etc.

Set Up a Negotiation Period

Every letter of intent needs to establish a clear negotiation period within which parties have time to discuss terms and conditions of the future agreement or transaction. The duration of the negotiation period is determined by the parties and depends on the type of transaction.

For instance, for a sample letter of intent to purchase a business, the negotiation period might take several months or even a year. While the negotiating process to purchase shares of a company may take only one or two months.

Non-Binding Nature

Whether you’re drafting business or real estate letter of intent template, the text of a document shall define its non-binding nature. There is a lot of confusion with regard to what is the non-binding nature of this letter. Most people mistakenly think that a letter of intent does not create any legal obligations. However, this is not so.

A letter of intent to purchase company, goods, real estate, or services does not oblige parties to enter any transaction or agreement in the future. On top of that, the letter does not create any rights and obligations of the parties arising out of such a transaction or agreement.

At the same time, the parties to this letter are bound by the provisions related to the letter itself. For example, if the negotiation process is exclusive, either party shall maintain such an exclusivity. Or, both parties shall maintain confidentiality of the negotiation process.

Confidentiality Clause

It is common to include in a letter of intent to purchase a business, real estate, services, or other assets a confidentiality clause. This is a mutual obligation of both parties to refrain from the disclosure of confidential information.

Confidential information includes all information the parties are exposed to during the negotiation process, including trade secret information, data about the parties’ employees and staff, financial obligations, etc. The confidential obligation remains in force for the whole duration of the negotiation process.

If the parties wish so, they can sign a separate non-disclosure agreement instead.

Exclusivity vs. Non-exclusivity

A letter of intent to purchase business, real estate, or other assets shall address if the negotiation process shall be exclusive or not.

Exclusive negotiations mean that involved parties cannot undertake, submit, or consider any offers with third parties. This limitation, however, applies only within the established negotiation period. Exclusivity ensures certainty and predictability for both parties.

Non-exclusive negotiations allow parties to approach and contact an unlimited number of third parties in relation to the proposal of the present letter of intent during the negotiation period.

Defining Next Steps

Any letter of intent to purchase company, services, or any other assets shall address the next steps. In particular, what shall happen once the recipient gets this letter? A well-drafted letter of intent template shall ask the recipient to sign the document and send it back once the terms are acceptable. Therefore, it is vital to provide accurate contact details of the sender to keep the negotiation process running.

How to customize a letter template at FasterDraft?

To get a fully customized letter of intent to purchase real estate, a business, or enter another agreement, follow a few easy steps below:

1. Click the “Create Document” button.
2. Answer simple questions in the form.
3. Select a template’s format—letter of intent template PDF or Word.
4. Make a payment.
5. E-sign, download, and send your customized letter instantly.