This week’s question from our portal “Ask Us Anything” comes from someone who wishes to remain anonymous.
"I found a sample letter of intent online for buying a business. Can I just fill that in and send it over, or is there something in the letter of intent that actually changes what happens after it is signed?"
Yes to the first half, with care. A sample is a reasonable place to start, and starting from a structure beats staring at a blank page. What you should not do is fill one in and send it, because a sample was written for somebody else’s deal and you are about to put your name on it.
Your second question is the more important one. Yes, there are things in a letter of intent that genuinely change what happens after you sign, and none of them are obvious from reading a template.
The first is which clauses bind you. Most of a letter of intent is not meant to be enforceable, but some of it usually is. Confidentiality, exclusivity, and who pays the costs of the transaction are normally intended to bind both sides, and they are enforceable if the document says so. A sample will contain somebody’s else’s version of those clauses, and you may be agreeing to terms you have not thought about.
The second is the conditions, and this is where a weak sample costs real money. If the deal is not expressed to be conditional on satisfactory due diligence and on financing, two things follow. Your deposit may not come back. And you can find yourself committed to a purchase after diligence has turned up something serious, with no clean way out.
We had a client in exactly that position. Everything about the business looked good going in, and then due diligence turned up serious indications of fraudulent activity. Because their letter of intent had proper conditions in it, they were able to walk away immediately and recover their deposit in full. A downloaded sample would not have given them that, and the difference between the two documents only became visible at the moment it mattered.
The third is whether your deposit is refundable. If you are putting money down, the document should say plainly what happens to it if the deal does not close and who decides. This gets left vague more often than any other term.
The fourth is the price. Even where the price is expressly non-binding, the number you write becomes the anchor for every negotiation that follows. Moving away from it later reads as retrading, whatever the document says about being non-binding, so a range tied to stated assumptions is worth more than a precise figure guessed early.
There is a practical problem with samples on top of all that. Most of what circulates online was drafted for another jurisdiction or another kind of transaction, so it may reference the wrong statutes, assume a share purchase when you are buying assets, or leave out the exclusivity period entirely. You cannot tell which by reading it, because a document that is wrong for your deal looks exactly like one that is right for it.
So use a sample as a checklist of headings if it helps, then write your own terms into it, then have somebody read the binding clauses before you sign. If you would like the full sequence for drafting one from the terms you have actually agreed, our guide to how to write a letter of intent for a business purchase works through it step by step.
This answer is general legal information, not legal advice, and it cannot account for the facts of your situation. Always speak with a lawyer before you act on it.
P.S. If a question like this one has come up in your own business, schedule a complimentary discovery call with our firm and we will walk through it with you.
