Outlining the basic terms of a real estate transaction in a letter of intent can help prevent future disagreements between parties — it can also lead to them. When this type of document is incomplete, self-contradicting or up for interpretation, problems often arise. The most significant is confusion as to whether the letter is binding or non-binding. While one party may see the document as a simple guideline designed to build momentum towards a final deal, the other party may believe the terms in a letter of intent are set in stone.
The majority of our clients would like to create a letter of intent that is non-binding and unenforceable, as their circumstances could change before the deal is finalized. In cases like these, it is critical to create a letter of intent that explicitly states this fact. In addition, any language that refers to the letter as an “agreement” should be omitted from a letter of intent, since a court may interpret this language as a binding agreement. While Minnesota law states that any agreement to enter negotiations in the future is unenforceable, it’s better to be safe than sorry when drafting a letter of intent.
Want to learn more? Attorney At Law Magazine has published an in-depth article explaining the precautions to take when drafting a letter of intent. Check it out to get information that could prevent legal problems down the line.
Want to learn more? Mitchel Chargo authored an in-depth article which was published in the Minnesota Attorney at Law magazine explaining the precautions needed when negotiating and drafting a letter of intent. Check it out to get information that could prevent legal problems in the future, or call Mitchel at 763-546-1200.