Letters of Intent: A Tricky Legal Tangle

You can’t be a ‘little bit pregnant’; can you have a legally non-binding agreement? Full-blown written contracts can be such a chore, can’t they? Especially when you’re at the initial “exploration” stages of a business negotiation. You’re not ready to close a deal–you need more time to work things through and conduct your due diligence–but you want some form of commitment from the other side. So what do you do? Entrepreneurs often resort to a letter of intent. Sometimes, they’re called a memorandum of understanding (although that’s more often in a government or international law context). You’ve had initial discussions; you’ve signed mutual confidentiality and nondisclosure agreements. You’re on your way. A letter of intent can show that: You’re getting serious about moving forward. You’re ready to make a public announcement of your collaboration (and make your competitors quake in their boots). You’ve authorized any necessary spending for the transaction. You’re committed to a time line for making this happen. In short, you’re trying to find a more formal way to express interest without being legally obligated to…