LOI (Short) for Commercial Transactions

Short Letter of Intent for Commercial Transactions

BS.DC.47

This Short Letter of Intent for Commercial Transactions template is intended for general use rather than any specific type of commercial transaction. It is in the form of a letter but there is an accompanying alternative form, the Short Memorandum of Understanding for Commercial Transactions . It is the same in substance as this template but its drafting is a little more formal and it is in agreement form rather than letter form.

This document is based on, but is a much simpler version of, the accompanying template Letter of Intent for Commercial Transactions . Unlike that template, it does not include any provisions about data protection but if you consider that such provisions are needed, you should instead use the Letter of Intent for Commercial Transactions.

The purpose of this template is to allow each party to conduct discussions and exchange information with each other about a proposed transaction without finding that it has inadvertently entered into a legally binding contract. If correctly used, it will ensure that each party will only be bound by a subsequent detailed definitive agreement in writing which states that it is legally binding.

A preliminary document such as this can also provide a practical means of showing the intent of the parties to go ahead with a deal and reduce the potential for misunderstandings. However, even if you use such a document, you still need to avoid doing anything legally binding on you and to avoid creating anything else in writing except the definitive written contract referred to above.

This template does not provide for any pre-contract work/services or steps preparatory to doing such work/services. This means that if either party “jumps the gun” by doing any work, takes any other steps, or incurs any expense, in anticipation of a definitive contract being signed at a later stage, that party will be doing so “voluntarily” and at his own risk. In those circumstances, he will be unlikely to be able to recover payments for work done, steps taken, or expenses incurred by him, unless and until such a definitive contract comes into existence which provides for him to recover such payments. However, there is a Letter of Intent with Provision for Pre-Contract Services/Works which does cater for pre-contract work/services to be carried out.

A LOI can be very useful, but it is incomplete by nature and it can only properly be a short term measure. As soon as possible after signing it, if the parties do decide to go ahead with the transaction, they should replace it by a definitive detailed contract. If they do not, the parties will be left in a very uncertain legal position which can lead to disputes and legal problems.

Before using this template, we recommend that you read the Guidance Notes on Heads of Terms, Memoranda of Understanding, Letters of Intent and Term Sheets .

This document is in open format. Either enter the requisite details in the highlighted fields or adjust the wording to suit your purposes.

Optional phrases / clauses and notes are enclosed in square brackets. These should be read carefully and selected so as to be compatible with one another. Unused options should be removed from the document.

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