The letter of intent (LOI) sets out a declaration of intention in relation to the prospected detailed negotiations.
Binding contractual content
Normally the LOI will contain
- an agreement on the securing of serious negotiations
- unless already concluded separately:
- agreement on the implementation of due diligence (Investor Due Diligence)
- agreement on the consequences of a breakdown of negotiations
- responsibility for consultancy and representation costs
- exclusion of damages claims
- etc.
Non-binding contractual content
Further legal effects and obligations are normally not desired.
This means that part of the LOI, which is agreed as non-binding, will address in particular the following issues:
- purchase object
- purchase price
- assurances
- guarantee.
Declaration of intention
A declaration of intention is in practice also referred to as:
- Memorandum of Understanding (MoU)
- Heads of Agreement
- Term Sheet
