What's actually binding in an LOI versus just a statement of intentions?
The label on the document — "letter of intent," "term sheet," "statement of intentions" — doesn't determine what's actually binding; the specific wording inside it does. Two documents with different titles can have identical legal effect if they're drafted the same way, and two documents both called "LOI" can differ enormously depending on how carefully each clause is written.
What usually is binding, regardless of title, is a short list of specific provisions: confidentiality over information exchanged, an exclusivity or no-shop commitment restricting the seller from talking to other buyers, allocation of each side's own costs, and which jurisdiction's law governs the document. What's usually not binding is everything most people assume the document is actually "about" — price, payment structure, closing conditions, and the decision to sell at all — since those are meant to be worked out later in a definitive purchase agreement.
Because this split is exactly where poorly drafted documents go wrong — vague language can accidentally make the whole thing binding, or leave real ambiguity about which parts survive — it's worth having a Treadstone business lawyer read the actual clauses rather than relying on what the document is called.
Key takeaways
- The document's title doesn't determine what's legally binding — its wording does.
- Confidentiality, exclusivity, cost allocation, and governing law are commonly binding regardless of label.
- Price, structure, and the decision to sell are usually left non-binding.
- Have the specific clauses reviewed rather than relying on how the document is titled.