Letters of Intent – Real Estate and Business Transactions

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Letters of Intent – Real Estate and Business Transactions

Epps & Coulson, LLP is and has been counsel for buyers and sellers of real estate, operating businesses and asset buy/sale transactions, both in normal conditions, as well as in bankruptcy and receivership conditions.  Regardless of the environment in which the transaction takes place, most of any consequence start with negotiations and move to a letter of intent (“LOI”) before the formal, final transaction documents are drafted and signed.

This update is about LOIs.  What is an LOI?  It is a short term sheet of key points to use to finish negotiations, set a timeline and use to move to formal agreement for the parties to sign.  The parties often use the LOI to decide whether the deal is of interest at all to the parties, whether there are any terms that the other party requires that are not acceptable, and it eventually usually forms the basis for spending time (and money) to move to a full scale binding agreement.

LOIs typically include the identity of the parties, confidentiality clauses/non-disclosure terms, purchase pricing or formulas to calculate the purchase pricing, other key financial terms, terms to facilitate investigation, things that have to happen in order for the parties to agree, and deadlines.  LOIs are not typically deemed to be a binding agreement between the parties as to the underlying transaction, but certain terms (confidentiality, duty to act in good faith) are typically enforceable.  And, if the parties want to make the overall LOI enforceable, the terms of the LOI must be clear to that effect.

Of preeminent importance is the seller’s protecting confidential information (e.g. client lists, financials, etc.) and intellectual property.  So, often, the parties enter into not only a LOI, but also a full scale non-disclosure agreement (“NDA”) that governs how sensitive documents and information is handled, who can see it and how it is used.  LOIs and NDAs are vitally important to real estate and business transactions.

If you have contract questions or want to know more or if you want to learn about our General Counsel program, please contact Dawn at: dcoulson@eppscoulson.com.

Information contained in this Memo is intended for informational and educational purposes only and does not constitute legal advice or opinion, nor is it a substitute for the professional judgment of an attorney.  It is likely considered advertising.  Epps & Coulson, LLP encourages you to call to discuss these matters as they apply to you or your business.

Attorneys admitted to practice in California, New York, Colorado, Texas, and Oregon