The real utility of a letter of intent is that it formalizes a preliminary agreement on a topic before negotiations get underway, it outlines what can and can’t be talked about outside of that negotiation, and it provides a roadmap that describes how things will proceed.
Letters of intent are up for negotiation, as are the contracts themselves. One party may present an LOI, then the other party can counter with edits or a different LOI entirely. Ideally, the end product will protect both parties in their subsequent negotiation and fulfillment of the contract that the LOI posits they will attempt to agree on.
A letter of intent can include provisions that are both binding and non-binding. The ways in which a letter of intent can be binding vary. Some of the least binding LOIs essentially contain a contractual agreement to treat the LOI as non-binding. Some more binding LOIs can include the rules of negotiation of a contract as a binding agreement. Or an LOI can specifically spell out elements of an agreement (for example, a date for deal to be finished, who will write the contract, specifics on financing); these usually include a condition requiring these points to be approved by a board. One of the most binding types of letters of intent, also known as “failed letters of intent,” betray the entire concept of a letter of intent and serve as a contract in their entirety. A letter of intent should bring parties together and help lay out terms as a way to reduce the risk of litigation.
It’s not uncommon that letters of intent include non-disclosure agreements, or include ‘no-solicitation’ provisions. A non-disclosure agreement (NDA) is where parties agree what information stays confidential and what information can be shared. In the context of a LOI, an NDA would refer to specific components of the deal. A no-solicitation provision would stipulate that one party can’t hire any of the other party’s employees.
Other ways in which an LOI can protect both parties negotiating a deal include provisions stating that the deal can only go through if financing has been acquired by one or both parties, or that a deal has to be made by a certain date.
The contract that the City of Dearborn wants the City of Dearborn Heights to sign is a business deal. They are selling us a product 911 dispatch our City Council needs to look at this as a business deal and negotiate this in that manner. #keepour911