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Could a letter of intent bind you in a contract?

If you call a document a “letter of intent,” is it enforceable as a contract?


One thing is certain, however: Letters of intent open the doorway for some serious contract disputes. The argument over whether or not the parties involved actually have a legally binding agreement can end up causing more problems than the document was meant to resolve.

The underlying issue is that any two people signing a letter of intent can have completely different ideas of what that document means.

It could just be intended to be a simple paper trail showing that the parties entered into negotiations but hadn’t committed themselves yet to an agreement.

On the other hand, if the parties seem to have an intention to be bound by the terms in the document and there’s enough specific information included within the document they signed, that letter of intent might be a binding contract — even if it clearly states it isn’t.

In addition to the possibility that the whole document could end up being enforceable, letters of intent often have clauses that are clearly designed to survive even after negotiations fall apart. Either party could end up being legally held to a confidentiality clause, which is common and probably not a concern. However, breakup fees and other binding provisions can also creep into a letter of agreement and catch an unwary signer by surprise.

In essence, it’s probably wisest to treat a letter of intent much like any other legal document you might sign — with extreme caution. You don’t want to skim through it or sign in haste. If the other party is sincere, the opportunity isn’t going to vanish.

Take the time to read through any letter of intent with care. If you aren’t sure about whether or not the terms are sufficiently vague enough about your rights and obligations to avoid being enforceable get a legal opinion before you sign.

Source: Miami Herald, “Signing a document? Proceed with caution — even if it says it’s not a contract,” Etan Mark, Jan. 07, 2018