Letter of Intent (LOI)

A Letter of Intent (LOI) is a document that outlines the preliminary understanding between two or more parties who intend to enter into a contract or formal agreement. It serves as a starting point for negotiations and typically includes the key terms and conditions that will be further detailed in a formal agreement.

Examples of LOIs include:

• In real estate, an LOI might be used to express interest in purchasing a property, outlining the proposed price and terms before a formal purchase agreement is drafted.
• In business acquisitions, an LOI could detail the intent to buy a company, specifying the purchase price, Due Diligence process, and timelines for completion.

Cases involving LOIs often revolve around the enforceability of the terms laid out in the letter. For instance:

• In Rider v. Hextall, the court examined whether an LOI constituted a binding agreement, ultimately ruling that while it expressed intent, it did not create enforceable obligations.
• In First Capital Realty Inc. v. 7454260 Canada Inc., the court upheld that certain clauses in an LOI could be binding if they demonstrated clear intent to form a contract.