Free Letter of Intent

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Type of Letter of Intent

Frequently Asked Questions

For legal purposes, a Memorandum of Understanding is the same as a Letter of Intent.What is a letter of intent?A Letter of Intent is NOT binding on either party and is only an expression of an intent to continue negotiations in good faith.
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LETTER OF INTENT

THIS LETTER OF INTENT (the "Letter") made as of this 30th day of August, 2015 (the "Execution Date"),

BETWEEN:


____________________ of _________________________, _______________, __________ __________

(the "Purchaser")

- AND -


 of _________________________, _______________, __________ __________

(the "Seller").

BACKGROUND:

  1. The Seller is the owner of commercial property that is available for sale.
  2. The Purchaser wishes to purchase commercial property from the Seller.

This Letter will establish the basic terms to be used in a future real estate purchase agreement between the Seller and the Purchaser. The terms contained in this Letter are not comprehensive and it is expected that additional terms may be added, and existing terms may be changed or deleted. The basic terms are as follows:

  1. Non-Binding
  2. This Letter does not create a binding agreement between the Purchaser and the Seller and will not be enforceable. Only the future real estate purchase agreement, duly executed by the Seller and the Purchaser, will be enforceable. The terms and conditions of any future real estate purchase agreement will supersede any terms and conditions contained in this Letter. The Seller and the Purchaser are not prevented from entering into negotiations with other third parties with regard to the subject matter of this Letter.
  3. Transaction Description
  4. The property (the "Property") that is the subject of this Letter is located at:
    ___________________________________________________________
    ___________________________________________________________
    ___________________________________________________________
    ___________________________________________________________.
  5. The legal land description for the Property is:
    ___________________________________________________________
    ___________________________________________________________
    ___________________________________________________________
    ___________________________________________________________.
  6. Purchase Price
  7. The Purchaser will pay to the Seller the amount of $0.00 USD on or before the 30th day of August, 2015 (the "Closing Date") as payment in full for the Property.
  8. The Purchaser will take possession of the Property on the 30th day of August, 2015.
  9. Real Property Disclosure
  10. The Seller does not know of any material facts that would affect the value of the Property, except those observable by the Purchaser or known to the Seller and stated in this Letter.
  11. Representations
  12. The Seller represents and warrants that the Property is free and clear of any liens, charges, encumbrances or rights of others which will not be satisfied out of the sales proceeds. If the representations of the Seller are untrue upon the Closing Date, the Purchaser may terminate any future agreement without penalty.
  13. Terms and Conditions
  14. The Property is subject to a lease or sublease and a copy of the executed lease is attached.
  15. The final purchase agreement will be subject to the Purchaser being approved for all financing by the Closing Date. Either the Seller or the Purchaser may cancel the final agreement if the Purchaser cannot obtain adequate financing by the Closing Date despite due diligence and good faith on the part of the Purchaser.
  16. The following describes fixtures or assets that will not be included in the final agreement:
    ___________________________________________________________
    ___________________________________________________________.
  17. The Purchaser accepts the Property in its current state and condition without any further work, repairs, treatments or improvements except the following specific work, repairs, treatments and improvements that the Seller will complete at the Seller's sole cost:
    ___________________________________________________________
    ___________________________________________________________.

This Letter accurately reflects the understanding between the Seller and the Purchaser, signed on this 30th day of August, 2015.

 
 

Letter of Intent

Alternate Names:

A Letter of Intent is also known as a:

  • Memorandum of Understanding
  • LOI
  • Letter of Interest

What is a Letter of Intent?

A Letter of Intent (LOI) is a statement of understanding between two parties. It is non-binding, meaning that the parties are not legally required to follow through with the terms of the agreement.

The LOI acts as a foundation for a definitive agreement. By agreeing to the Letter of Intent, both parties intend to continue negotiations in good faith.

If you are looking to purchase assets or shares from another business, you can use a Purchase of Business Agreement.

What is Good Faith?

When two parties agree to good faith obligations, it means that they are both sincere in their intent to act and carry out their promise.

What Can a Letter of Intent be Used For?

While a Letter of Intent can be used for many purposes, it is commonly used prior to business transactions involving the purchase or sale of shares or assets from one party to another.

An LOI can also be used to convey interest in leasing or buying a property.

Who Should Use a Letter of Intent?

Either party involved in a business transaction can create a Letter of Intent to set out terms for a deal.

For instance, an interested buyer might submit an LOI to a seller as a formal way to make an offer on a business. At that point, the seller could review the terms in the letter and decide if they wish to move forward with the purchase or if there are negotiations needed beforehand.

If the seller agrees to the content in the LOI, they would give their approval to move into the next stage of the transaction.

What is Included in an LOI?

In a Letter of Intent for a business transaction, the letter contains terms for the purchase, including:

  • Buyer and seller information
  • Description of the transaction (land, location, type, etc.)
  • Purchase price

Other common clauses might include:

  • Confidentiality or exclusivity clauses
  • Any contingencies for the deal, such as passing the due diligence process

Why Should I Use a Letter of Intent?

In business or real estate transactions, the purpose of an LOI is to provide an overview of the purchase details in advance of a binding agreement. It allows the seller to evaluate their options before agreeing to the terms with a buyer and saves on the costs involved with negotiation and due diligence.

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