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hi this is John Goodman once again and we are talking today about the problems with letters of intent and how to avoid those problems with letters of intent now let me begin by saying I am sure there are situations where sellers and buyers of real estate entered into letters of intent and the whole process goes smoothly and nobody has remorse and the buyers and sellers live happily ever after but nobody calls me about those situations I get calls about situations where parties have remorse about letters of intent and they also are surprised to find out that the letters of intent are stickier more binding than they expected them to be so how do we avoid those problems first we have to understand why they're tempting one of the reasons that letters of intent are so tempting is that as much as people hate to engage lawyers to help them put transactions together they hate engaging waiters less if they're pretty confident they have a deal so the idea of a letter of intent is is that people try and work out the rough terms of the deal what's being sold what's the price when is it supposed to close some other things and then if they can get a rough meeting of the minds on the eight or twelve or sixteen bullet points then they sign off to something that they perceive is not binding non-binding and then they go to the lawyer the lawyers to write up the draft here's some of the problems number one just psychologically once the parties agree to certain terms it's hard to back away for those terms even if the letter of intent is not binding on the parties and not all parties are sophisticated enough to know what they sort of agreed to in the letter of intent a worse problem is is that letters of intent some letters of intent even though they say letter of intent at the top are intended to be binding some don't have any language in them at all that says that they're not binding and then those letters of intent probably are binding on the seller and the buyer if they identify if the letter of intent identifies the material terms of a deal the party who has remorse is stuck even if the letter of intent has language in it that says it's non-binding it's quite common for letters of intent to have provisions in them even quote non-binding letters of intent all right Hart often have language in them that is is intended to be binding examples our confidentiality provisions are intended to be binding in letters of intent obligations who negotiate in good faith are intended to be binding on parties then a third level of problem is that notwithstanding crystal clear language in a letter of intent that said nothing in it is binding whatsoever it's not worth the paper it's printed on the problem is is that the combination of a letter of intent a document with the seller signature on it combined with the way the parties may subsequently negotiate may create enough stickiness between a seller and a buyer that if the seller later wants to pull the plug on the negotiations and says wait this has been going on too long we thought we had a deal we don't have a deal anymore and the seller wants to pull the plug if you will on the negotiations the the buyer might have enough to tie up the seller and the sellers property in court for a long time the nature of a webcast is I can't go in the nuances of explaining the law about that but I've written an article on this topic which is embedded in the description of this case the description of this webcast click on that link and it will explain that notion in more rigorous detail so what can parties do if they're trying to see if they're on the same page as the other side before they engage the lawyers to actually prepare the formal contract and the best answer that I can come up with is so seller and buyer exchanged a few emails try and see if there's rough agreement on six or eight or ten or twelve bullet points of the transaction but but don't agree to anything the seller doesn't sign anything the buyer doesn't sign anything once the parties think they get close enough on those bullet point terms of the deal then before signing a letter of intent talk to your lawyer that's it ladies and gentlemen remember we live in a complicated world be careful out there