Baking chocolate chip cookies or cakes are an exact science. Leave out an ingredient (ie baking powder) and you get a cake that falls flat. Add ingredients in the wrong proportion (ie too much flour) and you have a dry, crumbly cookie. In Florida Letters of intent (“LOI”), also known as memorandums of understanding (“MOU”), are no different: leave out specific language and the LOI is non-binding, include specific language and it’s binding. Are letters of intent binding in Florida?
Are letters of intent enforceable in Florida? The purpose of an LOI is to establish the basic terms of the proposed transaction to ensure that there is a common understanding concerning the key provisions before the parties spend money and time negotiating, as well as preparing the contract. An LOI may, or may not, be enforceable as a binding contract. This depends on the language used. If it is the intent of the parties that the LOI be nonbinding, the LOI should say so. If the LOI does not clearly establish that it is nonbinding, courts will analyze the specific language utilized to determine whether it addresses all of the essential terms of the contract or is merely an “agreement to agree.” No matter how specific and detailed they are, agreements to agree or statements of intent to contract such as an LOI are not enforceable in Florida, A letter of intent is not a binding contract but is a preliminary statement contemplating an offer. See Midtown Realty, Inc. v. Hussain, 712 So. 2d 1249 (Fla. 3d DCA 1998), in which the court held a letter of intent regarding the sale of commercial property was not contract, but a preliminary statement contemplating the offer, where the purchaser received the seller’s purchase and sale agreement after the letter of intent had been accepted and then continued to negotiate amendments to that agreement.
Here’s an example of a binding LOI provision: The parties intend this letter to be legally binding and enforceable. The letter contains all essential elements of the transaction. The parties will negotiate in good faith to reach an agreement on any nonessential terms not set forth herein, which will be codified, along with the essential elements set forth herein, in a subsequent formal agreement.
Here’s an example of a non-binding LOI provision: This letter is not intended to create, nor shall it create, any obligation on the part of Seller or Buyer with respect to the proposed transaction and shall serve only as a basis for proceeding with negotiations of an Agreement.
*Please be advised that this article includes general information for entertainment purposes; the information provided herein does not constitute legal advice and must not be used as a substitute for the counsel and services provided by a licensed attorney. Reliance and use of the information contained herein or linked is done at your own risk.