Can a binding letter of intent take the place of an agreement or contract?
In business I am trying to limit the paperwork and the time it takes to close deals. Thus, I'm thinking of eliminating a final official agreement and putting most of the terms in a letter of intent (binding).
Would this standup in court if I have to sue the customer/client?
David K
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Not clear what type of biz you are in. Thus, the UCC may or may not apply.
But if you are going to do away with something do away with the letter of intent and just go with the final agreement. The courts have no problem understanding this document.
As you know a letter of intent doesn't have to be one sided. It can be an illustration of the intent of both parties.
raichasays
The "binding" part of a letter of intent usually applies to a limited number of tasks that are to be accomplished before the parties make a final agreement. For example: the buyer is "bound" to conduct "due diligence" and inspect the property before the final agreement is made. Or the seller is "bound" to make corrections and repairs before the final agreement is made. But letters of intent, by definition, do not include all of the terms between the parties to the deal.
If all of the terms are included in a single document that both agree on, that's not a letter of intent. That's a contract.
Eliminating a written contract that contains all of the material terms of your agreement is the number one biggest mistake you can make in your business. If you need to sue anyone, make sure you have a solid contract in hand when you do it.
Ted
A letter of intent is not binding as in an agreement because it can be aborted by using some of the terms and conditions contained therein if the seller does not want to close the deal.
Anonymous
You may want to limit paperwork, but this is not the area I would reduce it. A letter of intent is typically so vague and does not spell out details that I would want included.
No matter which side of an agreement I was on, I would not settle on a LOI.
heart o' gold
I don't think so.
A letter of intent is one sided, it is a statement of what YOU are INTENDING to do. It does not obligate the other party.