We help draft a letter of intent or a preliminary agreement for your company's important negotiations — this way, you can strengthen trust in the intent. As the negotiations progress, we will draft the final agreement with more detailed terms.
Letter of intent
A letter of intent is a commitment between two parties that expresses their intention to negotiate a future agreement.
The letter of intent does not obligate the parties to finalize the main agreement but rather sets the framework and objectives for future contract negotiations. With a letter of intent, the parties demonstrate their willingness to start negotiations and attempt to reach a final agreement.
The terms of the letter of intent generally do not bind the parties, except for certain parts, such as confidentiality, exclusivity in negotiations, or other similar conditions that may be explicitly agreed upon as binding. Key business terms, such as price, delivery terms, and schedules, typically do not bind the parties.
Typically, a letter of intent includes at least the following:
• Parties involved
• Purpose: The purpose of the letter of intent and its goals.
• Terms: The key terms to be considered in the final agreement.
• Negotiations: A commitment to negotiate with the other party.
• Applicable law and dispute resolution: The applicable law and how potential disputes will be resolved.
• Non-negotiation clause: A possible prohibition on negotiating with others during the term of the letter of intent.
• Confidentiality: Definition of what information is to be kept confidential.
• Duration of the agreement: The validity period of the letter of intent and its termination conditions.
Preliminary agreement
A preliminary agreement is already a binding contract that includes certain conditions to which both parties have committed. It is often used to ensure that both parties are committed to specific terms before the final agreement is drafted.
A preliminary agreement is legally binding and obligates the parties to enter into a final agreement when the conditions specified in the preliminary agreement are met. If a party breaches the preliminary agreement, there may be legal consequences, such as liability for damages.
Typically, a preliminary agreement includes at least the following:
• Parties involved
• Subject of the agreement: A detailed description of the agreed matter.
• Terms: All terms that both parties have accepted.
• Applicable law and dispute resolution: The applicable law and how potential disputes will be resolved.
Summary
Letter of intent: Non-binding, it expresses the parties' intentions to continue negotiations and possibly make a final agreement in the future. Binding terms are usually limited to confidentiality and exclusivity in negotiations.
Preliminary agreement: Binding, imposes obligations on the parties to make a final agreement when the defined conditions are met. It includes more detailed and binding terms.
Both agreements are useful tools at different stages of contract negotiations, but it is important to understand their differences and use them correctly according to the needs of each situation.