5 Things to Consider When Writing a Letter of Intent for Business in New York
In New York State, Letter of Intent Establishes Contractual Agreement2 min read
In New York state, a letter of intent, also known as an LOI, is a document that states a contractual agreement between two or more parties prior to signing any formal legal documents. A letter of intent outlines the proposed terms and conditions of an agreement and does not necessarily binding the parties to the agreement, but rather to further a discussion in a nonbinding way. A letter of intent is often used in the preliminary stages of negotiation to ensure an understanding between both sides so that more detailed legal contracts can be prepared.
Business owners and executives have much to consider when writing a letter of intent and it is important to understand the complexities of the New York state laws. Here are five key things to consider when drafting a letter of intent in New York.
1. Recitals
The recitals of a letter of intent provide context and background of the agreement and should accurately reflect the interactions between the parties who are entering the agreement. Including recitals in the body of the letter of intent are also important as it allows the reader to have a better understanding of the information included in the agreement. It is inadvisable to use templates or boilerplate to create recitals that will only reflect one party’s interests and terms, as each contractual agreement is different.
2. What is Included in the Agreement
The letter of intent should state all of the material terms of the agreement, including the parties involved, purpose of the agreement, timeline, any applicable fees, deliverables, obligations, and any other pertinent details. The letter of intent should also include any additional terms and conditions. In New York, any additional terms and conditions which are not communicated to the other party may be exempt from enforcement in a contract.
3. Good Faith Clause
A good faith clause is advisable to include in an LOI, as it can provide the parties with more protection in the case of procedural misconduct or breach of the agreement. A good faith clause outlines the expectations of the parties in respect to the negotiation and performance of the underlying agreement. In difficult circumstances, it can provide a framework for a fair and equitable resolution between both parties.
4. Disclaimer
It is critical to include a disclaimer in your letter of intent, as this informs the parties that the letter is not a binding agreement and is used only to further discussion. This can prevent any misunderstandings during the negotiation process, as all parties must agree and sign any binding contract for it to be enforceable.
5. Legal Service
It is important to seek legal services before drafting a letter of intent in order to ensure that all of the necessary terms and conditions are included. This is especially important if you are a business located in New York, as a local legal professional will be up to date on all of the current regulations and practices. UpCounsel is a great resource for businesses looking for legal counsel, as they provide access to experienced lawyers with the skills to draft custom letter of intent documents that meet the specific needs of the parties involved.
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