A letter of intent (LOI) is a document that summarizes the understanding between two or more parties regarding a potential transaction. LOIs are commonly used when the parties are contemplating a merger-acquisition, joint venture, real estate purchase or lease, or other significant transaction. An LOI outlines the general terms of the deal, often with the stated understandings that the specific terms of any deal are subject to further negotiation, and that the parties are not obligated to complete a transaction. Because the parties will likely be disclosing confidential information—including the fact that they are having such discussions—the LOI should usually include confidentiality and nondisclosure terms.
In Texas, a Letter of Intent (LOI) is typically a non-binding document that outlines the preliminary understanding between parties who are considering a major transaction, such as a merger-acquisition, joint venture, or real estate deal. The LOI serves to summarize the key points of a proposed agreement before the parties enter into a legally binding contract. It usually includes terms that are subject to further negotiation and clarifies that there is no obligation to proceed with the transaction. However, certain clauses within the LOI, such as confidentiality and nondisclosure terms, can be binding if explicitly stated. Texas courts will generally honor the intentions of the parties as expressed in the LOI, provided that the language clearly indicates which provisions are intended to be binding or non-binding. It is important for parties to carefully draft the LOI to avoid inadvertently creating a binding agreement or obligations they did not intend to undertake.
