Letters of Intent
Letters of Intent (LOI), Memoranda of Understanding (“MOU”) and other writings, such as term sheets, are frequently used to summarize preliminary agreed upon deal terms, such as the purchase price, financing terms, due diligence parameters, confidentiality, so-called “no-shop/exclusivity” clauses, closing date and other relevant deadlines. However, these LOI/MOUs do not contain all important deal points, as they frequently occur before either due diligence is completed or the definitive acquisition agreement is negotiated. The LOI/MOU must be specifically and artfully drafted so as not to become immediately enforceable, so the results of due diligence necessitating additions and/or revisions may be addressed in a definitive acquisition agreement.
If the intention is not to have the LOI/MOU binding until after completion of the due diligence and all of the relevant terms of the transaction have been negotiated, the LOI/MOU must clearly state that intention. Alternatively, if the LOI/MOU is to impose legal obligations immediately or have certain provisions of LOI/MOU be binding (such as no-shop/exclusivity and/or confidentiality) while other provisions non-binding, the wording of the LOI/MOU must likewise reflect those objectives.
To avoid unintended consequences, you should consult with an attorney and ensure that the proposed LOI/MOU accurately reflects not only the recited terms, but also the time at which enforceable obligations attach.
Please contact us if you have questions.
Date: August 30, 2017
By: Adam D. Page, Esq.
Adam D. Page is the Managing Director of the Corporate Department of Finneran & Nicholson, P.C. He can be reached at (978) 462-1514 or via email at firstname.lastname@example.org.