ABA Family Legal Guide

Forming and Operating a Small Business

Franchising and Buying a Business

Buying a Business

What is the statement/letter of intent?

It is generally difficult for the parties to determine if the deal can be done without discussing the major terms of the transaction, including overall structure and price. Whether the discussion is detailed or general, you and the seller will want to document the status of your evolving understanding, before you get to the point of negotiating an actual contract.

This desire often will result in a statement of intent document. The statement (or letter) of intent is by definition an agreement to agree, and may not be enforceable as a contract. It is important that this fact be repeated in the language of the document and that you and the seller fully understand the limitations of the document. You also may need a lawyer to advise you on how to make sure that the document is not enforceable.

As long as you and the seller understand that the statement of intent is just designed to clarify your thinking and points of agreement during the negotiation process, it can be very helpful in drafting the contract for purchase and sale of a business.