Is a letter of intent binding?
A letter of intent is not binding. Therefore, when concluding a declaration of intent, care must be taken to ensure that the provisions are not formulated in a non-binding way. If provisions are included in a declaration of intent that do not make it clear that it is an intention, the court may consider the agreement to be binding. An example of this is: Supplier delivers to customer [...]. Better is: Supplier has the intention to deliver to customer [...].
Conditions of realization may also be included in the letter of intent. For example, parties may stipulate in the letter of intent that they are only obliged to continue negotiations at the time a financing is raised or if no details come to light during a due diligence.
Why should you conclude a letter of intent?
Although a letter of intent is not binding, it is still useful to conclude a letter of intent. It ensures that the negotiating position of the parties is clear. By properly formulating the intentions it becomes clear that there is no final agreement yet.
Would you like support in drawing up and/or negotiating a letter of intent? Our lawyers will be happy to assist you. Please feel free to contact us for more information.