Letter Of Intent in India: Meaning, Legal Application and Drafting

Published on 11 May 2019 by Shivi

For the purposes of expanding and, entering a joint venture or merger and acquisition, a business gets involved in transactions relating to sale and purchase. These transactions are carried out over a period of time rather than as one-time transactions. This requires the business to go through multiple formalities and manage several legal documents. However, one of the most important documents that lay down the basic conditions for such sale-purchase is the Letter of Intent.

What is a Letter of Intent?

A Letter of Intent is a formal letter that is drafted by one person and given to another to lay down the specifics of their transactions. An LOI lays down the particular actions and procedures to be followed by the parties till the time they sign the official sale-purchase agreement.

The letter of intent is usually created for the sale and purchases made by businesses that require further details regarding such transactions. It makes the sale and purchase between the business and other party official and states that the deal will be completed through a legal document at a certain point in the future.

It merely establishes the intention of the parties to perform a certain transaction in future and to enter into a legally binding contract for the same. An LOI is also known as a Memorandum of Understanding or heads of agreement.

Is Letter of Intent Binding?

The legally binding nature of a letter of intent depends upon the language used in the document. If the letter merely establishes the intention to enter into a contract, it may not be considered as a legally binding document in the eyes of law. However, if the provisions of a letter of intent include clauses like exclusivity or non-disclosure, it becomes legally binding on the parties signing it.

If the parties wish to make a letter of intent a legally binding document, it is advised to get the letter of intent drafted by a good documentation lawyer.

What are the Contents of a Letter of Intent?

An LOI generally includes the following details:

  1. Particulars of both parties such as name, address, phone number, and email ID.

  2. Name of the business and nature of business.

  3. Purpose of Intent.

  4. Future outcome of such intent.

  5. Plan of action, timeline and procedure to be followed after the letter of intent is signed.

  6. Clauses like confidentiality, exclusivity, jurisdiction, and law applicable.

Procedure for Drafting Letter of Intent

To get a letter of intent drafted online through platforms like Legistify, only the information relating to the parties, the goods or services involved for sale, details of the intent and ID proofs are required. All the work relating to the drafting of the provisions is handled online.

The lawyer understands the purpose of the Letter of Intent and drafts the document on the basis of information provided. The letter is evaluated for any errors or omissions and then can be used by the parties to establish their intent to transact for sale or purchase.

Businesses consider a letter of intent as the foundation of any key transaction and it must be drafted carefully if the business intents it to be binding upon the parties involved. Legistify can help you with the online drafting of a Letter of Intent in India. Call us at  846-883-3013 or send us an email at [email protected].

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