Letters of Intent: What to Include Beyond Legal Documents

A Letter of Intent (LOI) does more than summarize legal positions. When used properly, it acts as a negotiating roadmap: it signals seriousness, limits surprises, and sets expectations for communication, timelines, and responsibilities before lawyers draft a final contract.

In my 15 years advising clients on mergers, investor deals, and commercial agreements, I’ve seen carefully scoped LOIs prevent wasted time, reduce misunderstandings, and preserve value during due diligence. Below is a practical guide to what to include beyond legal boilerplate, a sample skeleton LOI you can adapt, and tactics to avoid common pitfalls.

Why include more than legal clauses?

Legal terms (choice of law, arbitration, enforceable confidentiality) matter — but they do not replace clear business terms. An LOI that omits who does what, when, and how much often creates ambiguity that slows a deal or causes disputes during negotiations. Adding operational and procedural details helps parties move efficiently from intent to binding agreement.

Authoritative resources for general contract and negotiation practices may be helpful when refining clauses (see Consumer Financial Protection Bureau on contracts and negotiation basics: https://www.consumerfinance.gov). For definitions and context about LOIs, professional references like Investopedia provide background (https://www.investopedia.com).

Core items to include (beyond strictly legal language)

1. Executive summary / purpose

• One-paragraph description of the transaction and high-level purpose. State who is proposing the LOI and who the counterparty is.

1. Business economics and structure

• Purchase price or valuation metric (or range). Specify whether numbers are firm or preliminary.
• Payment mechanics: lump sum, installments, earnouts, stock vs. cash, escrow and any Good Faith deposit.
• Allocation of purchase price for tax purposes (if agreed) or note that it will be negotiated.

1. Key assumptions and exclusions

• Identify material assumptions that underlie the proposal (e.g., retention of key employees, access to IP, customer contracts).
• List any assets or liabilities expressly excluded.

1. Timeline and milestones

• Target dates for due diligence, signing, closing, and any interim milestones (e.g., financing commitments). Use calendar dates or number of business days.

1. Confidentiality and data handling

• Reference an existing NDA or include a confidentiality commitment specifying what data can be shared, permitted uses, and data return/destruction obligations.

1. Exclusivity / no-shop provisions (if applicable)

• If you want the other party to suspend active solicitations, include a defined exclusivity period and clear termination triggers.

1. Scope of due diligence

• Define what documents, systems, and personnel access will be provided and the expected format (virtual dataroom, site visits). Include any sensitive items that will require additional safeguards.

1. Roles and responsibilities during due diligence

• Assign primary points of contact and who will prepare which documents. Clarify who covers third-party fees for financial/technical reviews if that’s part of the negotiation.

1. Conditions precedent

• List the events that must occur before a party is obligated to close (e.g., financing, regulatory approvals, third-party consents).

1. Interim operations

• For acquisitions or mergers, state how the business will be run between signing and closing: limitations on major decisions, hiring/firing, or disposing assets.

1. Expenses and breakup fees

• State whether each party bears its own fees or if a breakup fee/ reverse break fee applies in specified circumstances.

1. Communication protocol

• Define how parties will communicate (email, designated representatives), how press releases are handled, and who may speak to employees or customers.

1. Exclusivity and duration of the LOI

• Specify the LOI’s effective date and when it expires. Clarify which sections—if any—are intended to be binding (typically confidentiality, exclusivity, and expense provisions).

1. Signatures and next steps

• Provide signature blocks, and list immediate next steps after signing, with assignment of responsible parties and timelines.

Sample LOI skeleton (concise)

• Date
• Parties: Buyer / Seller (legal names)
• Transaction summary: purchase of X shares / assets / partnership terms
• Proposed consideration: $X / equity % / payment schedule
• Key assumptions and exclusions (bullet list)
• Confidentiality: reference NDA or include clause
• Due diligence scope and timeline: e.g., 30 days from LOI execution
• Exclusivity: X days, limited to material terms
• Conditions to close: financing, regulatory clearance, third-party consents
• Interim operations: limitations and reporting
• Expenses and breakup provisions
• Non-binding statement: note that the LOI is non-binding except for specified paragraphs
• Signatures and contact details

Which parts are usually binding?

Most LOIs are expressed as non-binding summaries of intent. However, parties commonly make the following provisions binding:

• Confidentiality / NDA
• Exclusivity / no-shop obligations
• Allocation of expenses and breakup fees
• Governing law for those binding clauses

Explicitly state which sections are binding. Vague language can lead to unintended enforceability.

Practical drafting tips (from practice)

• Be specific and quantifiable. Replace “reasonable timeframe” with “30 business days.”
• Use numbered deadlines and give each party a single point of contact. That reduces back-and-forth and prevents missed requests.
• Avoid boilerplate that mixes tentative business terms with final legal language. Separate the non-binding intent language from the binding clauses and label each clearly.
• If confidentiality is important, sign a standalone NDA before exchanging sensitive financials. I advise clients to get NDAs in place early; it prevents disputes about what was said during negotiations.

Common mistakes and how to avoid them

• Omitting the exclusivity timeframe. Without a date, an exclusivity clause can be contested. Always include a clear start and end date.
• Failing to specify whether numbers are firm or indicative. Mark price figures as “non-binding estimate” if not final.
• Confusing representations and warranties with intent. Save detailed representations for the definitive agreement, but list material items expected to be confirmed during diligence.
• Forgetting interim operating covenants. Unclear interim authority can cause operational paralysis.

Examples by use-case

• Mergers & acquisitions: emphasize purchase price mechanism, escrow, key employee retention, and transition services.
• Investor letters (startups): include target investment, pre-money valuation range, tranche schedule, board rights, and conditions like satisfactory due diligence.
• Commercial leases or partnerships: spell out revenue shares, exclusivity in territory, minimum performance obligations, and termination triggers.

When to involve lawyers and advisors

Drafting business terms in an LOI is a practical task, but legal counsel should review any language that could be binding—especially confidentiality, exclusivity, breakup fees, and statements about binding obligations. Tax and accounting advisors should review price allocation and potential tax-sensitive items before final agreement (IRS guidance on sale reporting may be relevant: https://www.irs.gov).

Links to related FinHelp resources

• For a general primer on Letters of Intent, see our glossary page: Letter of Intent (LOI).
• If you are preparing end-of-life or heirs-focused instructions, our guide on LOIs for heirs is practical: How to Create an Effective Letter of Intent for Heirs.

Final checklist before sending an LOI

• Have you identified which sections are binding?
• Are timelines and milestones specific and realistic?
• Is confidentiality protected before sharing sensitive materials?
• Have you assigned points of contact and tasks for the next 30–90 days?
• Did you confirm the LOI’s effect on taxes and accounting treatments with advisors?

Professional disclaimer: This article is educational only and does not create an attorney-client or advisor-client relationship. For tailored legal, tax, or financial guidance, consult a qualified professional.

Authoritative sources and further reading

• Consumer Financial Protection Bureau — consumer tools and contract guidance: https://www.consumerfinance.gov
• Investopedia — letter of intent overview: https://www.investopedia.com
• Internal Revenue Service — tax reporting and sale guidance: https://www.irs.gov