Legal Talk 28: How to convert the Letter of Intent into a Legally Binding Contract
Things are really busy with you now and it’s getting more difficult to meet face to face at.
You message me and say, “UCL, we’ve got the letter of intent signed by the big corporate! Thank you, we really appreciate your help!”
I’m really pleased. I sit back and gaze out of the window over the City of London. Your start up could be really big, I think. My mind begins to think about IPOs and press coverage and publicity and all the deals you could do and co-branding and partnerships and sponsorship deals and fame and invitations to big tech shows and TV and parties. I catch myself daydreaming and think I must get back to business.
I email you.
Okay, I say, what was the feedback on the Letter of Intent.
Your email back saying, “the decision maker at the big corporate was really impressed that we were solutions people, in that we suggested the Letter of Intent and then sent it over within a couple of hours and it accurately reflected what we had talked about. That made a really good impression. I think our contact at the big corporate likes our style.
Problem is that we have now set the bar high and so they will probably expect this all of the time. Our contact has now asked for the contract to be sent to her which is based on the Letter of Intent. Can you get this to us within the hour?”
Okay, before we make our next move, let’s think and talk strategy here. You have the Letter of Intent signed which is very good. So, there are some things to bear in mind now to close this deal:
A. No Surprises: Decision maker at the big corporate won’t want to see anything that doesn’t look familiar. She might pass the main contract to legal anyway but you increase the risk of this happening is she sees any departures from the Letter of Intent. So, stick to the principles in the Letter of Intent.
B. Keep it Short: The thing is that you probably don’t want to add much legal wording to the Letter of Intent anyway as a supplier. The reason for this is that as a supplier you are the one doing the work and so 80% of the obligations in the contract are on you. Normally, all the customer has to do is pay. The net effect of this is that if you as a supplier have a long contract then you will find that most of the obligations will be on you. So, the strategy here is just to add minimal wording to the Letter of Intent and try to get this signed by the big corporate in order to:
(a) keep it simple; and
(b) avoid getting lumbered with additional obligations which were not mentioned in the Letter of Intent but which the big corporate thinks about later on.
Does this make sense? I say.
“Yes, crystal clear,” you say. “Aside from this however, where do I actually find these tactical tips in text books and legal journals if I need them from time to time?”
Unfortunately, you probably won’t find this stuff, even if you search around for it. It’s called experience.
“So, Legal Coach, can you update the Letter of Intent and turn it into a contract within the hour?” You ask.
Yes, I will do it now and email it to you. You can then forward it on to the big corporate.
C. Set a Deadline: Just to say that another tip when emailing the contract to the big corporate is to create some kind of deadline for a response. Otherwise, the contract can sit in someone’s in tray for weeks without being looked at. You could say that you would appreciate it if the big corporate could get back to you with comments in the next day or two so that you can run this by your lawyer, to try and get this deal done this week.
I’ll start work on the contract now.
With best wishes
Your Legal Coach
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