Letter of intent (LOI)

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

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