The Purpose and Power of Letters of Intent

The listing firm received a letter of intent. Can this be presented, and does it need to be presented by an attorney? Once this letter of intent is signed, is it binding on both parties, or do the parties have to wait until the offer is submitted? The buyer corporation said the seller needs to sign it first and then they will have their attorneys draft an offer to purchase.
A listing broker who receives a letter of intent (LOI) will, per Wis. Admin. Code § REEB 24.13(3), present the LOI to the seller for consideration. All written proposals must be presented.

The LOI may begin the negotiations between the parties. The broker can give a general statement about what the LOI, but the seller may very well want to discuss this with their legal counsel.

LOIs give potential parties to a commercial transaction a nonbinding way to propose terms for a possible future transaction. An LOI is an agreement to agree in the future.

Under Wisconsin law, an agreement to agree is not an enforceable contract. An LOI reflects the parties’ preliminary negotiations and provides a tangible indication that the parties are serious about entering into a potential transaction in the future. It gives the parties a nonbinding picture of what a transaction between the parties might look like and may give them a sense of possible key terms.

An LOI can be used to propose a purchase price and earnest money amount in a contemplated sale or a rent amount and basic lease terms in a contemplated rental. An LOI presents an opportunity to see if the parties can even agree on basic business and economic issues without an intention to be bound.

LOIs are not binding. Neither party is required to proceed even if they were able to agree on basic terms in the LOI. The parties do not have an enforceable contract unless they proceed to actually enter into a lease or offer...
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