LOI binding

[rlopes]

I started the process of selling my business and I signed a LOI. Circumstances changed and I don't want to proceed with the sale.

Should I tell the buyer the reason, or should I just say that I won't proceed with it? The LOI states the following. Do I have any obligation to proceed with the transaction, or am I allowed to discontinue it, as I didn't signed a final Sale and Purchase Agreement?

5.CLOSING DATE The anticipated closing date of the purchase shall be established in accordance with the above scenario in Section 2.b. Payment Plan. Closing of the Proposed Transaction will be subject to certain conditions, including the following a. the preparation and execution of a definitive Sale and Purchase Agreement setting forth the terms of the Proposed Transaction b. the approval of that Sale and Purchase Agreement by the Board of Directors of both the Offeror and the Seller

Thank you

 

[adjusterjack]

Unfortunately, it depends on the terms and conditions of the ENTIRE LOI as an LOI may be interpreted by a court as binding if it too closely resembles a formal contract and does not contain clear disclaimers.

Either tell the buyer that you decided not to sell and take your chances.

Or, consult an attorney to see if you made yourself some trouble.

 

[quincy]

I started the process of selling my business and I signed a LOI. Circumstances changed and I don't want to proceed with the sale.

Should I tell the buyer the reason, or should I just say that I won't proceed with it? The LOI states the following. Do I have any obligation to proceed with the transaction, or am I allowed to discontinue it, as I didn't signed a final Sale and Purchase Agreement?

5.CLOSING DATE The anticipated closing date of the purchase shall be established in accordance with the above scenario in Section 2.b. Payment Plan. Closing of the Proposed Transaction will be subject to certain conditions, including the following a. the preparation and execution of a definitive Sale and Purchase Agreement setting forth the terms of the Proposed Transaction b. the approval of that Sale and Purchase Agreement by the Board of Directors of both the Offeror and the Seller

Thank you

What is the name of your state, rlopes, or, if not in the US, what is the name of your country?

As mentioned by adjusterjack, contracts need to be read in their entirety so you will want the entire Letter of Intent personally reviewed by an attorney in your area if you wish to have a better idea of the LOI's enforceability, should the buyer insist on holding you to its terms.

Following is a link to a good overview of LOIs, written by New Jersey attorney Ira Meislik for the American Bar Association. The article, "A Letter of Intent is Enforceable. A Letter of Intent is Not Enforceable," shows what needs to be considered and why you cannot be provided here with an easy answer.

http://www.americanbar.org/content/dam/aba/publishing/rpte_ereport/2012/4_august/rp_meislik.authcheckdam.pdf

Good luck.