The letter of intent (LOI) is a document where the buyer and seller agree to stop pursuing other potential business prospects and agree to wrap up the deal. The Letter of Intent creates provisions for both sides of the deal.
Letter of Intent: Buyer and Seller Protections
The seller agrees to sell the business for the proposed amount, and the buyer agrees to pay the proposed amount.
The terms of the Letter of Intent also provide protection for the buyer. The document allows the buyer to get serious of closing a deal without having to worry about another buyer moving in at the last minute and stealing the deal.
What the LOI Is and Isn’t
The Letter of Intent is not a binding document, which means it is not enforceable in court and does not bind the buyer to the deal. Either side can still walk away from the deal for any reason. Regardless of the legality, the LOI is an important step because it lays out the basics of the final deal.
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