Letter of Intent

Letter of Intent offers free samples

We are pleased to offer a free sample Letter of Intent. If you are considering preparing a Letter of Intent, please take a look.

Free Sample Letter of Intent

What is a Letter of Intent?

A Letter of Intent, also known as a Letter of Intent, is a summary of the basic terms of the transaction agreed to by both parties. A Letter of Intent is also known as an LOI for short. A Letter of Intent is prepared during the drafting of a contract and summarizes in a simple bulleted format the items agreed upon during the course of negotiations. Both parties sign the letter of intent to confirm that each party has reviewed its contents and that they are consistent with their intentions.

Purpose and Reasons for Creating a Letter of Intent

In order to initiate an international transaction, the terms of the transaction, the burden of costs, and other details must be decided. It often takes several months or even a year or more of discussions between the parties involved. In such cases, if no agreements have been reached, the parties may be unsure whether they can really proceed with the transaction on trust. Therefore, a Letter of Intent is prepared to confirm the matters agreed upon by both parties in the form of a Memorandum of Understanding (MOU). The purpose of preparing a letter of intent is (1) to confirm the basic contents of the transaction (address, name, purpose, object, price, etc. of the parties) and (2) to confirm the matters agreed upon during the negotiation and clarify the subject to be discussed in the future. There are no specific rules regarding the format of the Letter of Intent, so an itemized form or a simplified version of the contract may be used.

Contents of Letter of Intent

For example, a letter of intent for a basic agreement on the purchase and sale of goods will specify the Seller, Purchaser, Products, Volume, Price, Term, Jurisdiction, Governing Law, and the burden of costs up to the conclusion of the contract, etc. Not all of these items are required to be included in the contract, so only those items that have been agreed upon by the parties may be included.

Letter of Intent formats

There are no restrictions on the form of a Letter of Intent. There are many types of letters of intent, including those signed by only one party, those signed by both parties, those in contract form, those in letter form, and those in itemized form.

Legal binding effect of a Letter of Intent

The letter of intent itself confirms the agreement between the parties, but in principle, the content of the letter of intent is not legally binding as it is, and in principle, the parties cannot sue the other party solely on the basis of what is stated in the letter of intent. Although it is a general rule that a Letter of Intent is not legally binding, it is often clarified in writing that the Letter of Intent is not legally binding in order to avoid disputes over its legal validity, since the parties may have different intentions in making the Letter of Intent.

Differences between a Letter of Intent and Minutes of a Meeting

A Letter of Intent may be prepared in the course of contract negotiations for the purpose of clarifying matters discussed and agreed upon in the negotiations, so the contents to be included are similar to those of meeting minutes. While minutes of meetings are sufficient for simply confirming the intent of the parties, letters of intent differ from minutes of meetings in that they mutually confirm what the parties have agreed upon.

Letters of Intent and Memorandum of Understanding

A letter of intent is a document that summarizes the agreement between the parties, and a memorandum or memorandum of understanding (simply abbreviated as MOU) is the same thing in the sense that it is a document that summarizes the parties’ intentions. There is no clear distinction between the two. A letter of intent is a summary of agreements reached during the course of a contract and is generally not considered legally binding, whereas a memorandum or MOU is a short document that summarizes the agreement on a specific matter, often in the form of bullet points, but which attempts to make the subject matter of the memorandum or MOU legally binding. An MOU is considered more formal and binding than a Letter of Intent.

Letters of Intent and Term Sheets

There is no difference between a letter of intent and a term sheet in the sense that both summarize the basic understandings of the parties in order to facilitate the drafting of a contract at the time of conclusion. A letter of intent is often signed by both parties, whereas a term sheet is a memo or memorandum of understanding, which is often not in a form that is signed by the parties. Since term sheets are used in international financing, the financial institution will usually present a term sheet with the basic details of the facility, and the borrower is expected to review and discuss the contents of the term sheet.

Validity of Exclusive Negotiating Rights in a Letter of Intent

Letters of Intent are often considered to be legally non-binding, and it is sometimes explicitly stated in the Letter of Intent that they are not legally binding. On the other hand, however, a statement of exclusive bargaining rights in a letter of intent means that during the period of the letter of intent, the parties will not commence negotiations with other parties, and the other party will naturally rely on such a promise, so the provision is considered legally binding. However, since a letter of intent is not a final agreement, even if such a promise is made, it does not guarantee that a final agreement will be reached. Therefore, even in the case of a breach of exclusive bargaining rights, a claim for damages may be allowed only within the scope of reliance interest, not for damages based on performance interest.

Validity of confidentiality statements in Letters of Intent

Letters of Intent are often considered legally non-binding, and it is sometimes clearly stated in the Letter of Intent that they are not legally binding. However, a party may consider it important to ensure the confidentiality of information disclosed to the other party, regardless of whether or not the purchase agreement is ultimately concluded. Therefore, it would be reasonable to interpret the inclusion of an obligation of confidentiality in a Letter of Intent as meaning that the parties considered such a provision to be legally binding. Of course, given that the legally binding nature of the LOI is often an issue, it would be preferable to have a separate non-disclosure agreement, in a separate form from the LOI, if there is a possibility of disclosing material confidential information.

Break-up Fees

Letters of Intent are often considered legally non-binding, and it is sometimes clearly stated in the Letter of Intent that it is not legally binding. However, since the parties have already entered into the negotiation process, if the parties break the conclusion of the contract without reason, they may be found liable for damages within the scope of reliance interest as negligence in concluding the contract. In addition, if one party does not sincerely agree to discuss the conclusion of a contract, the party who refuses to discuss the matter may be required to pay a break-up fee in an amount agreed upon in advance between the parties. Thus, even if the letter of intent itself is not legally binding, it can be used as evidence that the parties have spent a lot of money and effort to negotiate a contract, and it can be used as material to determine whether the unilateral suspension of contract negotiations is an illegal act.

Fees for preparing a Letter of Intent

Letters of intent can be as detailed as a contract, or as simple as a simple confirmation of only the basic matters of the transaction between the parties. In addition, when Kuribayashi Sogo Law Office is requested to prepare a Letter of Intent, the manner in which we are involved varies, ranging from requests for advice on the basic scheme of the transaction, to requests for part of the contract negotiations, to requests to simply put the information in writing, etc. Therefore, the cost of preparing a Letter of Intent cannot be generally specified and therefore, it is not possible to specify a specific amount for a Letter of Intent. Please contact Kuribayashi Sogo Law Office (info@kslaw.jp) for a specific amount, which will be communicated to you on a case-by-case basis.

Standard Attorneys’ Fees for Drafting a Letter of Intent in English

Amount of attorney’s fees (excluding consumption tax)
200,000 to 400,000 yen

Sample Letter of Intent in English

This letter of intent (this “LOI”) will confirm the intent of ●●● (“●●”) and ▲▲▲ (“▲▲”) in relation to the sales transactions of “XXX”.

The parties have discussed the sales transactions of “XXX” and have agreed as follows:
(1) Object of sales: “XXX”
(2) Prospective number of sales: Attached as Exhibit
(3) Price per unit: Attached as Exhibit

The parties intend to negotiate and execute a Sales Transaction Agreement or Sales Agency Agreement (the “Agreement”) which will contain the detailed terms and conditions concerning the matters referred to above. It is the intention of the parties that they will negotiate in good faith and execute the final Agreement by ______________.

●● agrees that ●● will not purchase “XXX” from any third party (including without limitation the manufacturer of “XXX”) without written consent of ▲▲. ●● further agrees that, from the date of this LOI until the May 2020, ●● will not engage in discussions with any third party regarding transactions similar to those contemplated by this LOI．

The parties agree that this LOI, and the Agreement, if any, will be maintained in confidence by both parties except to the extent of any mutually agreed upon disclosure of information. The Agreement will contain a like provision.

In the event the parties are unable to conclude a final Agreement by that date, this LOI and the intentions set forth herein shall expire. This LOI merely summarizes certain of the principal terms and conditions proposed by the parties with respect to the transactions contemplated by the parties. This LOI is not an offer to enter into a contract, and no party’s signature hereon is intended to be, and shall not be deemed to be, an acceptance of any offer by the other party. Except as to Paragraph XX and Paragraph XXI, the parties hereby expressly agree and acknowledge that this LOI is merely an expression of intent among the parties and not intended to be legally binding and that the actions contemplated by the LOI shall in all respects be subject to the execution of a definitive agreement in form and substance satisfactory to the parties and their respective counsel.