What Is A Non-Binding Letter Of Intent? (2026)

Why Use a Non-Binding LOI?

You might wonder why someone would write a non-binding letter of intent when they could just create and sign a binding contract. However, a non-binding LOI can be useful for a number of reasons, including:

• Establishing a solid framework for negotiations
• Demonstrating both parties’ intent
• Helping eliminate confusion

A non-binding LOI also makes it easier for either party to identify potential dealbreakers early on.

Essential Sections to Include

The exact terms of a non-binding LOI can vary based on the circumstances, but generally, your letter should at least include the following:

• A clear description of the proposed transaction
• A suggested timeline for the transaction
• Proposed pricing and payment terms
• What due diligence must occur beforehand

A letter of intent should cover any confidentiality terms the parties must agree to as well.

Describing the Proposed Transaction

Any non-binding letter of intent needs to describe the transaction in detail. For example, when you write a stock purchase letter of intent, you should detail the number and value of shares to be purchased, any price adjustments and the form of payment to be used, such as cash, buyer stock, seller financing or earnouts.

When your LOI includes clear, specific details, it can simplify the negotiation process.

Keeping the Terms Non-Binding

To avoid potential confusion and future legal issues, the conclusion of a non-binding LOI should clearly state that it is not establishing a legal obligation between the parties.

Governing Law and Expiration

In a letter of intent or contract, “governing law” is a provision stating which jurisdiction’s laws will apply if there’s a dispute. Both parties should agree on a governing law.

Many LOIs also include an expiration date. If the parties don’t accept the terms and move forward before this date, they’ll need to create a new LOI.

How to Draft One Effectively

Here are a few tips to help you create an effective LOI:

• Include clear statements that the letter doesn’t create a binding contract.
• Clearly separate binding terms, like confidentiality agreements, from non-binding terms.
• Avoid language like “will” or “shall.”
• Make contingencies like due diligence and contract execution clear.

It’s important to note that a non-binding LOI shouldn’t require any fees or deposits. If one party pays the other, a court might determine that they have established a legal working relationship.

Want to Learn More About Non-Binding Letters of Intent?

In any business relationship, having the right types of documentation provides peace of mind and protects everyone involved. Explore ConsumerShield’s library of legal templates and guides to learn more about documents like these or to create your own today.