Incentives and limits in letters of intent: are they worth the paper they’re written on?

Abstract

Purpose – The purpose of this paper is to review the extensive case law in England and Wales on contractually binding letters of intent. The research focused on discovering whether the limits commonly found in binding letters of intent were upheld by the courts and so were effective in practice. It also reviews whether these limits are, as presumed by drafters, sufficient to act as incentives to the parties to conclude the full contract. The paper uses case law to analyse and evaluate the legal and business efficacy of these limits and incentives. It considers the rationale for such limits and incentives before drawing its conclusions and making recommendations. Design/methodology/approach – The paper draws on cases in England and Wales to analyse the judicial interpretation of binding letters of intent. The author has adopted a black letter approach to this subject by focusing almost exclusively on primary sources. As there is no relevant legislation in England and Wales, the primary sources are case law...