Sample Letter of Intent to Purchase

A Letter of Intent is also known as Memorandum of Understanding and Memorandum of Agreement. It is a legal document that binds (conditional to satisfaction of the parties involved) two or more parties into a deal agreement. A Letter of Intent is signed after exhaustive discussions, followed mostly by confidentiality agreement about the proposed transaction. Letters of Intent are a controversial pieces of document , which is viewed ambiguously under the law as both binding and not binding. According to late Arthur Corbin, author of Corbin on Contracts,"… a letter of intent is not a useless document, but it is not, in principle, a contract except perhaps a contract to continue bargaining in good faith." The legal validity of Letter of Intent still continues to be litigated. Any letter of intent to purchase contains the features as outlined below. Let's first know them, before taking a look at a sample Letter of Intent to purchase.

Letter of Intent to Purchase: Features
A Letter of Intent to purchase is defined as a written statement expressing the intention of the undersigned to enter into a formal agreement, for the purpose of a business purchase transaction. A letter that shows intent highlights most of the common characteristics listed below.

Confidentiality: Letters of Intent to purchase are signed after agreeing to a confidentiality document; if for some circumstances, it has not happened, then each party agrees to keep the transaction and information exchanged about the negotiations confidential in a Letter of Intent.

Commitment Towards Each Other and the Deal: A letter of Intent to purchase is an indication that all parties involved in the transactions are aware of the deal and all issues concerning it. When a person signs on the company's behalf, it is accepted that the senior management is equally responsible towards the deal. A Letter of Intent is also considered as a step towards serious negotiations.

Committed Deal Advertised: After agreeing to a Letter of Intent to purchase, the parties in the agreement usually issue a joint press release. This is beneficial to raising the company's stocks, position in the market and sending a message out to the competitors, in case of a merger or take over.

Performance and a Time Bound Deal: Letter of Intent to purchase also has mention of a deadline for closing the deal, and the consequences if the parties fail to meet the deadline. Once it's signed, finance and personnel are assigned towards the completion of the deal.

Letter of Intent to Purchase: Sample
This sample Letter of Intent to purchase is a transaction on an agreed property, to an agreed amount, between the purchaser and the seller.

October 2nd, 2007
Mr. Samuel James
Ben Kingsley
Ward Brokerage & Co.

Sub: Residential property located at: 27th Mayfair, Denver.

The following are the basic terms upon which we would be prepared to purchase the property. The terms are however negotiable and will be incorporated into a formal agreement (the "Agreement") to be negotiated. The basic terms are as follows:

1. Purchaser: Ms. Martha Wells
2. Vendor: Current owner of the Property represented by Realtor: Louie Jackson
3. Property: 27th Mayfair, Denver free and clear of all liens, charges and encumbrances at Closing.
4. Purchase Offer: $35,000
   • $10,000 Initial Deposit
   • $5000 Additional Deposit following condition removal
   • $20,000 Balance
5. Deposit: Upon execution of the Agreement, the Purchaser will deposit the amount of $10,000 which will be fully refundable if the Conditions Precedent are not satisfied or waived in writing by the Purchaser. If the Purchaser defaults at closing, the deposit will be retained by the Vendor as its sole remedy to compensate for losses.
6. Conditions Precedent: The obligation of the Purchaser to purchase the Property will be subject to satisfaction or written waiver by the Purchaser of the following conditions within 90 days after execution and delivery of the Agreement.
   Completion of all satisfactory physical and environmental inspections of the Property; including suite inspections. Completion of satisfactory due diligence search and examinations; Satisfactory review of the title of the Property.
7. Additional Points: This letter of intent clearly states the major terms of the agreement that the Purchaser is prepared to move forward with. This letter of intent is in no way a legally binding agreement between the Purchaser and the Vendor, and is completely conditional depending upon the transaction.

Sincerely,
Ben Kingsley

The above sample Letter of Intent to purchase is a generic document, and it differs from normal letter writing. Most people prefer to go through lawyers to get the deal done, to ensure that there are no loopholes and the deal is watertight.