The Letter of Intent: To Be Bound or Not to Be Bound, that Is the Question

Abstract

The letter of intent is a broadly used tool in different negotiations throughout the entire world. The legal implications of these documents however aren’t always clear. Depending on ‘the content of the letter of intent as a whole, in combination with the factual circumstances’, a letter can be solely morally binding, establish some juridically binding obligations or even constitute the envisaged, final agreement. Various research has been conducted on these possible (civil) legal effects. Less clear remains the factual interpretation leading to these legal effects. How do judges interpret ‘the content of the letter as a whole, together with all the factual circumstances’? Essential in this perspective are elements emphasizing a binding intention of the parties, the animus contrahendi. This article contains a concise synopsis of the most prominent case law on the matter in Belgium, France and the Netherlands. In their pursuit for the true intention of the parties involved, courts appear to rely on certain factual indicators. What are those factors, which bearing should be given to them and what perils must negotiators anticipate on?