Can I be liable for a buyer's legal fees if I walk away after signing an LOI?
Generally not, unless your LOI specifically included a cost-allocation or reimbursement clause addressing exactly this situation. Cost allocation is one of the categories of provision LOIs are often drafted to make binding regardless of whether the rest of the document is — so check first whether yours says each side simply bears its own legal costs no matter what happens, which is the common default approach, or whether it says something different if one side walks away.
Where sellers get caught out is not reading this clause carefully before signing. Some LOIs go further than a simple "each side pays their own costs" arrangement and include a specific reimbursement obligation if the seller withdraws without cause, particularly in deals where the buyer has spent significant money on early due diligence. If your LOI doesn't contain language like that, walking away generally doesn't expose you to the buyer's legal fees just because they incurred them pursuing the deal.
Rather than assuming either way based on what feels reasonable, have a Treadstone business lawyer confirm exactly what your specific cost allocation clause says before you decide how to proceed.
Key takeaways
- Liability for a buyer's legal fees generally requires a specific clause addressing that outcome.
- Cost allocation is often drafted to be binding even when the rest of the LOI isn't.
- The common default is each side bearing its own costs regardless of what happens.
- Confirm your specific clause's wording before assuming you're exposed either way.