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Sample Letter of Intent to Purchase

Sample Letter of Intent to Purchase

A letter of intent to purchase is an agreement that deals with a sale negotiation. To see a sample of such a letter, scroll down.
Loveleena Rajeev
A letter of intent is also known as Memorandum of Understanding/Memorandum of Agreement. It is a legal document that binds (conditional to satisfaction of the parties involved) two or more parties into a deal or agreement. A letter of intent is signed after all the parties involved in the contract hold exhaustive discussion and sign a confidentiality agreement. Letter of intent is viewed ambiguously under the law, as it has both, binding and non-binding legal status. According to late Arthur Corbin, author of Corbin on Contracts, "... a letter of intent is not a useless document, but it is not, in principle, a contract except perhaps a contract to continue bargaining in good faith." Any letter of intent to purchase contains the features as outlined below.

Confidentiality: Letter of intent is signed after agreeing to a confidentiality document. If for some circumstances, the transaction (i.e. the said purchase) does not take place, each party agrees to keep the information in confidentiality.

Commitment: The letter of intent implies that all the parties involved in the transaction are aware of the deal and all issues related to it. If a representative signs on the company's behalf, it is accepted that the senior management is equally responsible for the deal. A letter of intent is also considered a step towards serious negotiation that is to take place before the final transaction.

Advertisement: After agreeing to the terms and conditions of a letter of intent, the parties in the agreement usually, issue a joint press release. This is beneficial for raising the company's stocks, position in the market, and sending a message out to the competitors.

Performance and a Time Bound Deal: The letter also has the mention of a deadline for closing the deal, and the consequences if the parties fail to meet the deadline. Once it's signed, human resources are assigned towards the completion of the deal.

Sample #1

October 2nd, 2011
Mr. Samuel James
Ben Kingsley
Ward Brokerage & Co.

Sub: Residential property located at: 27th Mayfair, Denver.

The following are the basic terms upon which we would be prepared to purchase the property. The terms are, however, negotiable and will be incorporated into a formal agreement (the "Agreement") to be negotiated. The basic terms are as follows:
  1. Purchaser: Ms. Martha Wells
  2. Vendor: Current owner of the Property represented by Realtor: Louie Jackson
  3. Property: 27th Mayfair, Denver free and clear of all liens, charges and encumbrances at Closing.
  4. Purchase Offer: $35,000
    • $10,000 Initial Deposit
    • $5000 Additional Deposit following condition removal
    • $20,000 Balance
  5. Deposit: Upon execution of the Agreement, the Purchaser will deposit the amount of $10,000 which will be fully refundable if the Conditions Precedent are not satisfied or waived in writing by the Purchaser. If the Purchaser defaults at closing, the deposit will be retained by the Vendor as its sole remedy to compensate for losses.
  6. Conditions Precedent: The obligation of the Purchaser to purchase the Property will be subject to satisfaction or written waiver by the Purchaser of the following conditions within 90 days after execution and delivery of the Agreement.
    • Completion of all satisfactory physical and environmental inspections of the Property; including suite inspections
    • Completion of satisfactory due diligence search and examinations.
    • Satisfactory review of the title of the Property.
  7. Additional Points: This letter of intent clearly states the major terms of the agreement that the Purchaser is prepared to move forward with. This letter of intent is in no way a legally binding agreement between the Purchaser and the Vendor, and is completely conditional depending upon the transaction.
Ben Kingsley

Sample #2

Name of Seller:

Dear Mr. _______________,

We thank you for your cooperation regarding the potential transaction (hereafter called as Transaction) between _________________ (legal name of seller/company) and __________________________ (legal name of buyer/company). We would like to mention certain terms and conditions related to the transaction so that both the parties have better understanding.
  1. The purchase price of each share will be $______________.
  2. _____________ (Buyer) and __________ (Seller) will negotiate the details of the transaction and prepare a Definitive Purchase Agreement before the ______________, 2013.
  3. _____________ (Seller) will provide ____________ (Buyer) all the records related to the past performance of the company and the buyer will ensure that this information is not used for any purpose not related to the execution of this transaction. _____________ (Buyer) will not share the information with a person/party who is not involved in this transaction. Failure to do so will amount to a breach of confidentiality and appropriate measures will be taken by the seller.
  4. ____________ (Buyer) and ____________ (Seller) will be responsible for the expenses incurred on the legal fees and taxes that are liable to be paid to the government.
  5. By signing this letter of intent, ________________ (Buyer) and _______________ (Seller) acknowledge and accept all the terms and conditions mentioned here.
Name:_________________________________ (buyer)

Signature: __________________________ (buyer)

Name: _______________________________________ (seller)

Signature: ______________________________________ (seller)

Disclaimer: The sample letters mentioned above are generic, and the information provided in this article should not be substituted for the advise of an appropriate professional. Reader discretion is advised.