The Letter of Intent of the Offer to Purchase

Expertises connexes

The letter of intent is often used in a context where a future buyer has identified a business he wishes to acquire. This letter is made by the buyer to the seller and it allows the seller to express its willingness to make a possible offer.

Unlike an offer to purchase, a letter of intent does not bind the parties to a transaction. In fact, when properly executed, an offer to purchase will usually be binding on the parties to whom it relates. It may be prudent, to avoid confusion, to include a clause in the letter of intent stating that the document is not binding on the parties.

The letter of intent can contain various clauses, both general and more specific. It allows to establish the broad outlines of the transaction. Here are some examples of clauses that may be contained in your letter of intent:

– The nature of the proposed transaction
– A timetable
– A price range for the acquisition and payment terms
– Closing conditions of the transaction
– Exclusivity – a clause stating that the seller will not be autorise to negotiate with other interested parties and the timelaps of this clause
– Indemnity clause, which provides for the payment of an amount in case of damages

In this way, it gives the parties an idea of what the final offer might look like. The letter of intention does not need to spell out every detail, however, as it does not constitute the offer to purchase. It will be signed by the buyer and seller and other parties involved in applicable cases.

The letter of intent is often preceded by a confidentiality agreement which stipulates that neither the buyer nor the seller can talk about the fact that they are in negotiations.

Our team of transactional lawyers can assist you in this process to ensure that the documents are consistent with your intentions and needs.