Some may view a letter of intent as a “casual/non-binding” document, however certain provisions within the document may have legal effect. Many letters of intent state that the parties agree to engage in good faith negotiations of the terms of the definitive agreements.
This carries some real risks to it. Sometimes, the signing of a letter of intent can be a real momentum boost. One of the attractive elements of a letter of intent is its purported non-binding nature. However, courts have found letters of intent to create binding obligations, even if the letter itself does not explicitly state that it is binding. This is part of the uncertainty and potential risk of any such undertaking. If the parties do not want this letter of intent to be legally binding, then the document MUST clearly state that. For example, it might state that this letter of intent is not a legally-binding document and that neither party will be bound by its terms (unless there are any terms that you want to be binding) unless and until a definitive agreement is executed. This is essential.
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