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Question added to topic Legal Basics For StartupsAugust 14, 2007

Should I sign a non-binding Letter Of Intent if I think it has questionable info on it?

I'm interested in purchasing an existing business and my real estate broker stated seller is requesting that I sign a non-binding Letter of Intent. I am afraid to sign due to questionable info. The non-binding LOI states a sales price and earnest money figures that I am not in agreement with. This sales price and earnest money is what my real estate broker and the seller have discussed. I am confused because sources on the internet state that although the LOI is stated to be non-binding, I am still submitting the information as agreeable in "good faith." Does this mean that at the time of contract, I will have to place my earnest monies up front due to the signed non- binding LOI?
There is no such thing as a non-binding letter of intent. At the very least, it obligates you to negotiate in good faith to carry out the intended transaction. It can also go much farther than that and, if it contains sufficient material facts, can be the only contract necessary to bind you to the transaction. I don’t recommend that you sign any letter of intent without it being reviewed by knowledgeable counsel, so you should definitely not sign one that contains questionable information.

Nina L. Kaufman, Esq. is an award-winning New York City attorney, edutainer and author. Under her Ask The Business Lawyer brand, she reaches thousands of entrepreneurs and small business owners with her legal services, professional speaking, information products, and LexAppeal weekly ezine. She also writes the Making It Legal blog.

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