Are LOIs legally binding?

It depends. Commercial provisions in an LOI are generally non‑binding unless the parties expressly state otherwise. Confidentiality, exclusivity, or fee provisions can be drafted as binding. Evaluate language of intent and any payment or remedy clauses.

Can an LOI be signed electronically?

Yes. Electronic signatures are valid under the federal ESIGN Act (15 U.S.C. ch. 96) and state UETA statutes in most jurisdictions. Ensure consent and retention requirements are met for consumer-facing records.

Do I need a notary for an LOI?

Not usually. Notarization is rarely required for LOIs. Consider notarization only when a jurisdiction, title company, or counterparty specifically requests it for verification.

How do I avoid unintended binding obligations?

Use clear language: label non‑binding sections explicitly, reserve binding effect to specified clauses, and include a statement that definitive documents are required for substantive obligations.

What happens if parties disagree after signing?

Disputes may lead to negotiation, mediation, or litigation. Retain negotiation history and consult counsel to determine whether any LOI provisions are enforceable under applicable contract law.

How can I withdraw or revoke an LOI?

Withdrawal depends on LOI language. If non‑binding, a party can generally terminate negotiations per any termination clause. If binding obligations exist, withdrawal may require agreement or could result in liability for breach.

Electronic Signature
Templates
Miscellaneous
Business Letter of Intention

Business Letter of Intention

This template is fully customizable. Edit the text, fill out the fields, and send it for signature. Give it a try!

BUSINESS LETTER OF INTENTION

This Letter of Intention ("LOI") is made and entered into as of Effective Date: by and between Party A: with principal address and Party B: with principal address .

RECITALS

WHEREAS, Party A is engaged in the business of providing goods and/or services as described herein and has proposed the terms of a prospective business arrangement with Party B; and

WHEREAS, Party B desires to evaluate and, subject to the terms of this LOI and any definitive agreements, to enter into negotiations to consummate the proposed transaction described below; and

WHEREAS, the parties intend by this LOI to set forth certain understanding and procedures which will serve as the basis for the preparation of a definitive written agreement(s).

PROPOSED TRANSACTION

Proposed Transaction Summary:

SCOPE OF WORK

Detailed Scope of Work

PAYMENT TERMS

Total Proposed Consideration Deposit / Initial Payment Payment Schedule / Milestones

Late Payment Fee: Payment Method:

TERM AND TERMINATION

Term Commencement Date: Term Expiration Date:

Either party may terminate this LOI upon written notice to the other party after a cure period of days for material breach. Upon termination, neither party shall have further obligations hereunder except for those provisions that are expressly identified as binding.

CONFIDENTIALITY

The parties acknowledge and agree that all confidential and proprietary information exchanged in connection with discussions and due diligence (the "Confidential Information") shall be held in confidence. Confidential Information shall not be disclosed to any third party except to the extent reasonably necessary to advisors who are bound to confidentiality or as required by applicable law. The obligations of confidentiality shall survive termination of this LOI for a period of years.

The parties agree that the confidentiality obligations and any mutual exclusivity provisions set forth in this LOI are binding and enforceable to the extent permitted by law. All other provisions of this LOI are non-binding expressions of intent unless and until set forth in a definitive written agreement signed by authorized representatives of both parties.

EXCLUSIVITY & EXPENSES

Exclusivity Period (if any): — During the exclusivity period, the parties shall negotiate exclusively in good faith and shall not solicit or negotiate with third parties with respect to the subject matter of this LOI.

Each party shall bear its own costs and expenses incurred in connection with the negotiation and preparation of definitive agreements unless otherwise agreed in writing.

REPRESENTATIONS, WARRANTIES AND CONDITIONS

Each party represents and warrants that it has full power and authority to enter into this LOI and to carry out its obligations hereunder. Any definitive agreement shall be subject to customary conditions precedent, including the satisfactory completion of due diligence, receipt of requisite corporate approvals, and execution of definitive documentation.

GOVERNING LAW

This LOI shall be governed by and construed in accordance with the laws of the State of , without regard to conflict of laws principles.

ENTIRE AGREEMENT; AMENDMENTS

This LOI constitutes the entire understanding between the parties with respect to the subject matter hereof and supersedes all prior discussions and agreements. Any modification or amendment to this LOI must be in writing and signed by authorized representatives of both parties.

MISCELLANEOUS

If any provision of this LOI is held to be invalid or unenforceable, the remaining provisions shall remain in full force and effect. The headings used in this LOI are for convenience only and shall not affect interpretation.

Party A (Printed Name):

By:

Date:

Party B (Printed Name):

By:

Date:

What a Business Letter of Intention Is and When Parties Use It

A Business Letter of Intention (LOI) is a preliminary written statement outlining the basic terms and mutual expectations between parties considering a business transaction. Common uses include purchase offers, lease negotiations, joint ventures, and asset or business sales. An LOI typically summarizes key commercial points — price, exclusivity, due diligence timeline, and closing conditions — without replacing a definitive agreement. It helps align parties early, set negotiation boundaries, and allocate short-term responsibilities while parties prepare more detailed, legally binding contracts.

Why an LOI Matters for Transaction Planning and Legal Clarity

An LOI focuses negotiations, documents core business terms, and reduces misunderstanding risk before investing time and expense in definitive agreements. While often non‑binding on substantive terms, it can create enforceable obligations for confidentiality, exclusivity, or break fees when drafted accordingly and supported by intent evidence under ESIGN (15 U.S.C. ch. 96) and state UETA rules.

Who Commonly Prepares and Signs a Business Letter of Intention

Typical participants include buyers, sellers, brokers, and legal or financial advisors who need an early record of agreed commercial points.

Acquirers and buyers outlining purchase terms and proposed timelines for due diligence and closing.
Sellers or owners summarizing acceptable deal structure and any required seller obligations pre-closing.
Brokers, investment bankers, or advisors using LOIs to document negotiated commercial terms while preparing definitive documents.

The LOI is a coordination tool: use it to align expectations, then move to contract drafting with counsel to finalize binding terms.

Typical Signatories and Their Roles

Buyer — Authorized Officer

A buyer signatory is usually an officer or authorized representative with authority to commit the buyer to negotiating exclusively, fund due diligence, and sign transaction documents. If the buyer is an entity, use the exact legal entity name and indicate signatory title to avoid later authority disputes.

Seller — Company Representative

A seller signatory should be the owner or an officer authorized to grant exclusivity, provide access for due diligence, and acknowledge preliminary terms. Where ownership is complex, include company formation details to clarify identity and authority.

Essential Parts to Include in a Professional LOI

A well-structured LOI balances commercial clarity with legal reserve language. Include concise sections that define the deal, timing, conditions, and any limited binding provisions.

Parties

Identify full legal names and entity types of all parties involved and include contact information for primary representatives or advisors.

Transaction Summary

Describe the subject of the transaction (assets, stock, lease) and provide a high-level purchase price, payment structure, and any earn-out or holdback terms.

Key Conditions

List primary conditions precedent such as satisfactory due diligence, financing, regulatory approvals, and third‑party consents required to close.

Exclusivity

If applicable, state an exclusivity or standstill period, the start and end dates, and permitted exceptions for solicitation or competing offers.

Confidentiality

Include a confidentiality clause or cross-reference a separate NDA, and specify permitted disclosures and retention or return of information.

Binding Provisions

Clearly label which sections are intended to be binding (for example, confidentiality, exclusivity, fees) and state that other terms are non‑binding until a definitive agreement.

Required Information and Quick Field Checklist

Legal Names: Exact entity or individual names

Effective Date: MM/DD/YYYY format

Transaction Type: Asset sale or stock sale

Purchase Price: Total consideration stated

Exclusivity: Yes or No, with dates

Signature Blocks: Name, title, date

Step-by-Step: How to Prepare and Execute an LOI

Follow a short sequential process to draft, review, and execute an LOI so that negotiations proceed with a shared understanding and clear next steps.

01

Draft Terms: Summarize commercial points and identify any binding provisions.
02

Internal Review: Have legal and finance review for risk, tax, and regulatory concerns.
03

Negotiate Edits: Exchange revisions and track changes to preserve negotiation history.
04

Execute and Distribute: Obtain authorized signatures and send signed copies to all stakeholders.

How to Configure an Online LOI Workflow

Set up your digital workflow to collect signatures, enforce signer order, and capture an audit trail that meets ESIGN and UETA standards.

Field	Configuration
Signer Order	Sequential or parallel signing, set order to control flow
Authentication	Email link, SMS code, or KBA depending on risk
Field Types	Signature, initials, date, text, and conditional fields
Notifications	Automatic reminders and expiry alerts

Digital Delivery and Platform Integration Considerations

Choose a platform that supports secure eSign, audit trails, and the integrations you rely on for document routing.

File Formats: PDF, DOCX supported
Integrations: Salesforce, NetSuite, Google Workspace
Authentication Options: Email, SMS, KBA

Ensure the provider meets relevant compliance requirements (ESIGN, UETA) and supports your retention, archiving, and audit needs without altering core LOI language.

Where to Send and Who Receives a Completed LOI

Distribute signed LOIs to key parties to preserve a clear record and enable next steps such as due diligence, financing, or counsel review.

Counterparties: Send signed copies to all named parties and their counsel.
Advisors: Share with financial and legal advisors for review.
Escrow or Agent: Provide to escrow agents if deposit funds are involved.
Internal Records: Store in contract management or secure document repository.

Common Timelines and Deadlines to Include in an LOI

Define clear dates for exclusivity, due diligence, closing, and notice periods so parties know when obligations begin and expire.

Exclusivity Period:

Start and end dates or duration; commonly 30–60 days

Due Diligence Deadline:

Deadline for completing investigations and delivering materials

Closing Target Date:

Tentative closing date subject to conditions precedent

Termination Notice:

Notice period required to end negotiations or the LOI

Deposit Deadline:

When any earnest money must be paid or escrowed

Key Milestones from LOI to Definitive Agreement

Sequence the main milestones so responsibilities and timing are visible to all stakeholders during the transition from LOI to binding contract.

01

LOI Drafted

Initial commercial terms and limited binding clauses prepared by party counsel.

02

Negotiation and Edits

Parties exchange revisions, confirm exclusivity, and resolve key conditions.

03

LOI Executed

Authorized signatures obtained and signed copies distributed to parties.

04

Prepare Definitive Documents

Drafting of purchase agreement, schedules, and closing deliverables begins.

Common Mistakes to Avoid When Preparing an LOI

Leaving binding intent unclear, which can unintentionally create enforceable obligations.
Using vague commercial language that creates ambiguity during definitive agreement drafting.
Failing to define exclusivity or confidentiality scope and associated remedies.
Not confirming signatory authority or entity names, which can delay closing.

Potential Risks and Legal Consequences

Unintended Binding Terms: May create enforceable obligations

Confidentiality Breach: Exposure to damages claims

Misrepresentation: Risk of rescission or damages

Missed Deadlines: Loss of exclusivity or deal collapse

Authority Disputes: Signing invalidated without proper power

Data Privacy: HIPAA or state privacy compliance risk

Illustrative Use Cases for a Business LOI

Short examples show how an LOI can structure different transactions and clarify next steps before definitive documents.

Real Estate Purchase LOI

Buyer offers to purchase commercial property and outlines price and due diligence period.

Includes a 45‑day inspection window and confidentiality clause.
The LOI reserves the right to walk away if inspections reveal material defects and guides drafting of the purchase agreement.

Business Sale LOI

Prospective buyer summarizes price, proposed closing timetable, and financing condition.

Provides a 30‑day exclusivity period for due diligence.
The LOI states confidentiality and non‑binding commercial terms while requiring definitive asset purchase documents at closing.

Pricing and Feature Comparison for eSignature Providers

Comparison of common plan benchmarks and capabilities across major eSignature vendors. Pricing reflects published starting prices and typical plan features.

	signNow	DocuSign	Adobe Sign	PandaDoc	HelloSign
Starting Price	$8/user/mo	$15/user/mo	$14/user/mo	$19/user/mo	$15/user/mo
Free Trial	7-day free trial	Varies by vendor	Varies by vendor	Varies by vendor	Varies by vendor
Bulk Send	Yes (Business Premium)	Varies by plan	Varies by plan	Varies by plan	No
Audit Trail	Yes	Yes	Yes	Yes	Yes
HIPAA Compliant	Yes (BAA available)	Varies by plan	Varies by plan	No	No

Frequently Asked Questions About Business Letters of Intention

Answers to common practical and legal questions about drafting, signing, and enforcing LOIs under U.S. e‑signature law.

Need help? Contact support

Are LOIs legally binding?
It depends. Commercial provisions in an LOI are generally non‑binding unless the parties expressly state otherwise. Confidentiality, exclusivity, or fee provisions can be drafted as binding. Evaluate language of intent and any payment or remedy clauses.
Can an LOI be signed electronically?
Yes. Electronic signatures are valid under the federal ESIGN Act (15 U.S.C. ch. 96) and state UETA statutes in most jurisdictions. Ensure consent and retention requirements are met for consumer-facing records.
Do I need a notary for an LOI?
Not usually. Notarization is rarely required for LOIs. Consider notarization only when a jurisdiction, title company, or counterparty specifically requests it for verification.
How do I avoid unintended binding obligations?
Use clear language: label non‑binding sections explicitly, reserve binding effect to specified clauses, and include a statement that definitive documents are required for substantive obligations.
What happens if parties disagree after signing?
Disputes may lead to negotiation, mediation, or litigation. Retain negotiation history and consult counsel to determine whether any LOI provisions are enforceable under applicable contract law.
How can I withdraw or revoke an LOI?
Withdrawal depends on LOI language. If non‑binding, a party can generally terminate negotiations per any termination clause. If binding obligations exist, withdrawal may require agreement or could result in liability for breach.

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