Is a Letter of Intent enforceable? There isn’t a simple answer. It could be: (a) yes; (b) no, not at all; (c) some parts yes, and some parts no; (d) no, but it will be treated as if it were; and (e) no, but it may affect the parties’ later agreement.

First, why did Ruminations pick this topic today? About a month ago, we raised the question as to whether a detailed letter of intent (which we’ll now call an LOI) would help speed up the process of getting a deal done. One particular LinkedIn Group picked up on this and there were about thirty comments with most of them focusing on enforceability of an LOI. Accurate information, inaccurate information, and lots in between were tossed on the table. That was a recipe for confusion. Ruminations stood back, unable to figure out what underlay the lack of any single useful and “true” answer thread. Standing back led to introspection – why did the answer seem so obvious to us, but not to the community of principles, brokers, and attorneys? Well, introspection led to the realization that we’d never thought the issue through. We just believed our dogma, and man’s best friend is his dogma. Fortunately for our ego, after thinking this through, Ruminations feels safe in expounding that an LOI can be enforceable (if you aren’t careful, and sometimes even if you are), but now understands better why that is or what that really means. [Read more…]