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A Purchase Letter of Intent is a document that contains the agreement between a buyer and a seller during a product or service sale. It is a contract that records the initial transaction of both parties, giving them confidence in doing business in the foreseeable future.
A Purchase Letter of Intent is often non-binding, depending on the provisions and language used in the agreement. Unless both parties agree that the contract must be enforceable, a Share or Asset Purchase Agreement must be preceded for security purposes.
Get a copy of Purchase Letter of Intent template in PDF format.
Enter the sender’s name.
Enter the sender’s home address.
City, State, ZIP
Enter the sender’s city, state, and ZIP code.
Enter the effective date of the Purchase Letter of Intent.
Enter the recipient’s name.
Enter the recipient’s home address.
City, State, ZIP
Enter the recipient’s city, state, and ZIP code.
Enter the product or service being purchased.
I. The Buyer
Enter the name of the buyer.
II. The Seller
Enter the name of the seller.
III. The Product or Service
Mark Product if the buyer is purchasing a product. Then, enter the number of units being purchased and the price for each.
Mark Service if the buyer is purchasing a service. Then, enter the name of the service being purchased and its price.
IV. Purchase Price
Service is $
Enter the subtotal price of the product or service being purchased.
After tax is $
Enter the total purchase price of the product or service when tax is added.
Mark the box if the buyer wants to buy the product or service in cash.
Mark the box if the buyer is paying for the product or service through a check.
Mark the box if the buyer is paying for the product or service through a credit card.
Mark the box if the buyer prefers to pay for the product or service in other ways.
Mark Conditional if the Purchase Letter of Intent is conditional.
Conditional Sale of Agreement allows the buyer to take hold of the property even if it is not entirely paid yet. However, the title and ownership of the property remain with the seller until the buyer completes the payment.
If the Letter of Intent is conditional, enter the terms of the agreement.
Mark Not Conditional if the Purchase Letter of Intent is unconditional.
Unconditional Sale of Agreement is a type of contract that cements the agreement between the buyer and the seller. It prohibits the buyer from backing down from the deal once the Purchase Letter of Intent is signed.
VII. Binding Effect
Mark the box and enter initials if the Purchase Letter of Intent is binding.
This term suggests that the Purchase Letter of Intent is enforceable by specific performance. The buyer and the seller agree that in case of breach of contract, remedies will be inadequate. Thus, compensatory damages will not be sufficient for the buyer or seller to indemnify the failure to perform the obligation in the agreement.
Mark the box and enter initials if the Purchase Letter of Intent is non-binding.
This term suggests that the Purchase Letter of Intent is not enforceable. Its sole purpose is to present the preliminary transaction and agreement of both parties.
This term states that the Purchase Letter of Intent solely considers US dollars as the currency for the mentioned monetary value.
IX. Governing Law
Enter the state where its law will govern the terms and agreements of the Purchase Letter of Intent.
Enter the due date for the Purchase Letter of Intent to be signed and returned to the seller.
If the Purchase Letter of Intent is signed and returned before the due date, it confirms that a party accepts the terms of the agreement.
Enter the seller’s signature.
Enter the seller’s name in print.
Enter the date when the Purchase of Letter is signed.
Enter the buyer’s signature.
Enter the buyer’s name in print.
Enter the date when the Purchase of Letter is signed.
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How do I write a letter of intent to buy?
To write a letter of intent to buy, you must include all the details of your purchase. This includes, but is not limited to the item or items to purchase, price, financing arrangements, payment methods, contact details, and the date by which you would like the seller to have completed all of their requirements.
The letter of intent may be presented as a formal offer to purchase instead of an open-ended request for information so it must be detailed and specific enough that the seller can make a final decision on whether or not they will agree to your proposal.
Be as specific as possible and provide all the purchase-related information you deem necessary. Keep in mind that the more information you provide, the more comfortable the seller will be about continuing negotiations with you and being open to accepting your proposal.
It is important to keep the letter of intent as non-binding as possible so that no deal can be misinterpreted as being made before all terms have been agreed upon. You may section the purchase letter of intent for the other party to understand your intentions better, accurately providing all the relevant information and the terms and conditions you expect to adhere to.
Before you send your letter of intent to buy, be sure you have thoroughly reviewed it and, if necessary, revised it so that it is clear and concise. Make one final review before sending it to ensure there are no mistakes or typographical errors.
Is a letter of intent to purchase binding?
The letter of intent is meant to establish an early good faith basis for negotiations between both parties but has no legal force. It cannot be taken as a definite offer to buy. Any breach of its terms will not give rise to liability on the part of either party unless there is a specific provision for damages in the letter of intent.
Breaking off negotiations under a letter of intent or terminating it does not entitle either party to bring action against the other for damages resulting from the termination. The only remedy is a suit for specific performance of all or part of the negotiations leading to the formation of a binding contract, as distinguished from damages. When an agreement is reached as to essential terms and parties agree in principle on further details, there is little doubt that all parts of the negotiations have been concluded.
Is a purchase letter of intent the same as a purchase order?
A purchase letter of intent is not the same as a purchase order. A purchase letter of intent is an important document that outlines the terms and conditions of a potential purchase between two companies. Businesses often use it as a way to establish interest in buying or selling products, services, property, or equipment. It can also be used for foreshadowing future business relations between the two companies. For larger purchases, the purchaser may issue a purchase order that specifies the exact terms and conditions of the agreement and commits the buyer to make payments.
A purchase letter of intent states only what each party is willing to do, not what has been done or who will do it. In other words, this document cannot be used as a substitute for a legally binding contract between two parties. Unlike a purchase order, it does not commit the vendor to deliver goods or services because it has not gone through formal acceptance processes.
Since purchase letters of intent lack legal documentation, they are much easier to withdraw than purchase orders. This is why they are sometimes used in business-to-business transactions when the buyer wants to keep his options open and the seller wants to put pressure on him.
What should a purchase letter of intent include?
A purchase letter of intent should specify the basic terms of the sale, including the sales price and what is encompassed in the purchase. The parties should attempt to describe the transaction with all necessary specificity so as to avoid later claims that there were misunderstandings. In essence, it must have enough detail to stand by itself as an enforceable contract.
The purchase letter of intent must be executed by both parties. If it is not, the purchaser will have no legal recourse if the seller walks away from the deal after having received earnest money — a deposit paid by the buyer to bind a contract. The contract may not be binding on the parties until the formal purchase and sale agreement is signed.
Can a purchase letter of intent be canceled?
Yes, a purchase letter of intent can be canceled by anyone, anytime, until a binding purchase agreement with the seller is executed. Since it is not essentially a legally binding document, it won't have any legal consequences when a party backs out.
How do you end a letter of intent?
End your purchase letter of intent by emphasizing your intention to buy and the expectations you have for the transaction. Moreover, include a date by which you expect to receive feedback.
What is a stock purchase agreement?
A stock purchase agreement is a contract between entities where one party — the "seller" — agrees to sell assets, stock, or ownership of a company to the other party — the "buyer". The agreement establishes all terms and conditions that relate to the sale.
The term is typically used in reference to asset sales, such as when a subsidiary of a company is sold and the parent company is the seller. Stock purchase agreements can also be used in minority share purchases, but these are more commonly known as Stock Subscription Agreements and Share Sale Agreements
Those who use a stock purchase agreement need to ensure its accuracy and that it is properly worded, as it is a legally binding document that can have long-lasting implications.
In most cases, the buyer will want the stock purchase agreement to be as specific as possible in order to protect its business interests. The seller typically does not care about this level of detail and wants the sale price to remain as low as possible. This is why the terms and conditions of a stock purchase agreement can be difficult to negotiate and create much debate between the buyer and seller.
Often, negotiations may not be settled for several months or even years, depending on how difficult it is to agree upon all of the terms and conditions involved.
Is a letter of intent legal?
A letter of intent is essentially not legal. It contains no law and is essentially a non-binding contract unless it is included in a legally binding contract or agreement.
A letter of intent is not binding on either the buyer or the seller and only commits their respective agents to do everything in their power to complete the sale as described. If for some reason, an agreement cannot be reached by both parties, then there was no binding agreement in the first place and no recourse can be taken.
Are letters of intent enforceable?
A purchase letter of intent does not automatically create any legal obligation on behalf of either party; however, it does contain all the main points concerning the acquisition of goods and services. Although this document is not legally binding, the agreement usually becomes a part of the purchase contract. In other words, if all of the essential terms which are described in your purchase letter of intent agree with the main terms that are included in your actual purchase contract then you may be able to enforce it since it can become a valid confirmation between two or more parties.
What is the purpose of a purchase letter of intent in real estate?
A purchase letter of intent in real estate is used to convey an offer to purchase a property. It is used in the process of negotiating the terms of the agreement with the seller before it is finalized with a formal real estate sales contract. It acts as a collateral document in negotiations to protect both the buyer and seller from breaching a contract. The purchase letter of intent serves as an outline for what needs to be done before closing on the property. Nevertheless, a purchase letter of intent in real estate is not legally binding on the buyer or seller, therefore it is wise to include in the agreement a contingency clause that allows either party to terminate the purchase letter of intent within a certain time.
How long is a letter of intent good for?
In general, a letter of intent is good for as long as a full and proper contract is signed. The letter of intent should spell out the terms and conditions under which the parties have agreed to do business together. When a party decides to terminate a letter of intent, it should provide notice to the other party. The time period for providing such notice is usually one month, but this can vary depending on what was agreed under the letter of intent.
Is a purchase letter of intent an offer?
A purchase letter of intent serves as an offer to purchase specific products, stocks, or other purchasable goods and is delivered to the seller. For example, in the real estate industry, it is an important step in the process of buying a home. A purchase letter of intent should be regarded as legally binding because it clearly states the buyer's intentions to buy the seller's property for specific terms. It does not have to be written, but you'll want to have one drafted by your real estate agent or attorney before presenting it to the seller.
What does a letter of intent mean legally?
A letter of intent means a commitment to doing something. Whether it is signing a contract for renting an apartment or applying for a job, these letters may seem legally binding, but they are not.
The letter of intent usually initiates with phrases like "I am writing this letter to express my interest in purchasing your property" or "I'm sending you this letter to state my interest in applying for a job at your company."
While this sounds completely understandable, many people still think that a letter of intent is a legal document. They are not. The main reason being they do not have the same weight as an actual contract. When you sign a contract, you are legally committing yourself to doing something. For example, renting the apartment means you are giving them your word that you will pay for 12 months. If you do not, they can take legal action against you.
On the other hand, a letter of intent is not legally binding. It does not mean that signing it would oblige either party to go through with the deal. What it is, is a statement of your interest in doing that certain something.
How legally binding is a purchase letter of intent?
A purchase letter of intent is not legally binding. It is a letter in which the buyer and seller agree to bind themselves contractually with regard to a particular transaction. At this stage, all that exists is an agreement between the two parties. The purchase agreement itself is not drafted until after all of the contingencies have been settled or waived. A purchase letter of intent should contain mostly deal points regarding price, contingencies, and other items that are not contractually binding.
Is a stock purchase agreement good or bad?
A stock purchase agreement has its pros and cons. In a purchase agreement, the buyer and seller agree that the buyer will buy an agreed amount of shares from the seller at a certain price within a given time frame. There are several important things you need to look for in a stock purchase agreement.
A common issue in a stock purchase agreement is what happens if there is no closing date provided. If there is no closing date, then the agreement has not been finalized. If this happens and the buyer backs out of the deal or does not complete their end, they will have to buy back the shares from you — even if they have lost a lot of value since you first entered into an agreement with them.
Also, a stock purchase agreement should include a due diligence clause. This clause basically says that the buyer has to make sure they are getting what they think they are buying and protect themselves against any potential problems with their purchase. The last thing you want is for there to be an issue after the deal, like the seller of the shares didn't have title or ownership over them — then your deal could be invalid.
If you are selling shares, make sure the stock purchase agreement is clear about how many shares will be sold and what they are valued at. Also, try to get it in writing that there will only be one closing date so you don't risk having to buy back your own shares. If you are buying or investing in a company's stock, make sure you have a thorough understanding of the deal and all terms included in your contract.
Can you get out of a purchase LOI?
You can get out of a purchase letter of intent by sending a notice to the other party. It's a common misconception that a purchase letter of intent is binding and can't be broken. In fact, it should have the terms under which the agreement may be terminated.
In general, if both parties mutually agree to terminate before closing, then no penalties or further obligations apply as long as all documents related to the business transaction are returned.
Who should a purchase letter of intent be addressed to?
You must address your purchase letter of intent to the person or company you are going after.
If you have a salesperson selling a product or service, address your letter of intent to him or her. If you want to buy a real estate property, send the purchase letter of intent to the seller.
Letters of intent are a form of commitment letter in which you commit to a certain action in the future when an agreement is reached between two parties. In this case, your "future" action may involve purchasing from someone else.
The purchase letter of intent serves as a way for both parties to express their interest in doing business together. Thus, you must always address it to the owner of the property or products you intend to purchase.
Can a letter of intent be used in court?
A letter of intent may only be used in court if a judge has determined that it is a valid document. In other words, a letter of intent cannot simply be given to the opposing party and then used as evidence in court. Courts do not admit letters of intent because they are not signed by a licensed attorney and generally lack the safeguards put in place to protect the rights of those involved.
What is the purpose of a Purchase Letter of Intent?
Aside from outlining the agreement of the buyer and the seller, a Purchase Letter of Intent helps:
- the parties make informed decisions regarding the agreement;
- secure and assure the deal as the parties demonstrate potential business transactions, providing conditions on the contract and sealing them with signatures;
- express an agreement made in good faith between a buyer and a seller about purchasing a property or service; and
- determine liabilities if the contract is breached.
What are the types of a Purchase Letter of Intent?
- Business Purchase Letter of Intent. A Business Purchase Letter of Intent is a contract between a buyer and a seller to purchase a business entity.
- Real Estate Purchase Letter of Intent. A Real Estate Purchase Letter of Intent is a contract used in buying a real estate property.
- Stock Purchase Letter of Intent. A Stock Purchase Letter of Intent is a contract used to purchase a business stock, share, or investment. It is usually used in corporations, limited liability companies, and partnerships.
How to file a Purchase Letter of Intent?
The language used in a Purchase Letter of Intent must be clear to both the seller and the buyer. It is to guarantee that both parties understand the terms and provisions of their agreement.
It is also recommended that the Purchase Letter of Intent is signed with the presence of both parties to discuss if there should be an alteration or amendment of the contract before signing it.
Furthermore, to help secure both parties against liabilities due to negligence of obligations, the seller and the buyer must consider the Purchase Letter of Intent to be binding. A binding contract is enforceable by law which gives the negligent party a considerable penalty.
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