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Letters of intent provide clarity for business transactions

| May 23, 2019 | Business Transactions |

Louisiana business owners usually have big dreams for the future. For some, this involves merging with or acquiring another business. Business transactions such as these can seem complicated and even somewhat overwhelming, but a letter of intent can help address any concerns that a business owner might have.

A letter of intent is what some people refer to as a precontract. These written documents are generally — although not always — not legally binding, and instead act as blueprints for future contracts and other legal actions. It also confirms that all parties have an understanding of the general basics and main points of the upcoming deal.

Depending on the situation, a letter of intent may address any number of topics. However, the involved parties, a summary of key terms and substantive issues, an expression of commitment and provisional timelines are usually addressed in most letters. In general, none of these provisions are legally binding. Parties may elect to make any or all of the provisions legally binding, but they must specify in clear languages which ones are enforceable. There is also the possibility of unintentionally including language that could create legal obligations to which neither party wishes to be committed.

Crafting a letter of intent is a smart way to start most business transactions. These letters can dispel any ambiguity and can make clear the intentions of everyone involved. To avoid leaving out essential details or including unintentional legally binding provisions, business owners should consider speaking with a Louisiana attorney who is well-versed in business law.