Are the terms of a letter of intent (LOI) binding?

New Jersey business transactions attorney, Harold I. Steinbach, discusses why letters of intent should not be binding.

Contact Harold I. Steinbach

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Phone: (201) 525-1990

Transcript:

Again, unfortunately, sometimes clients do it before they even come to their attorney. But I prefer that most of the letter of intent not be binding. That is it should say its subject entering into a fully executed agreement otherwise it turns into a whole agreement. So generally, you say it’s a statement of intent and its not binding. There are a few exceptions. If you don’t have a separate confidentiality agreement then the seller needs to make the provision on confidentiality binding. The seller may put in an agreement that you can’t hire my employees that you meet during this, a no poach, you would want that binding. A buyer may insist that a seller take the business off the market for a period of time and they would want that binding. Those are the provisions that should be binding; everything else should not be binding.