This article posted on our partner site Mondaq.com illustrates how a letter of intent (LOI) can be interpreted as either binding, or non-binding on both parties.
To avoid drafting a legally binding LOI, the parties should consider three (3) central points. First, the LOI should explicitly state that LOI is not intended to be legally binding and should avoid the use of contractual language (e.g. “this agreement”, “upon acceptance”, or “it is agreed”). Second, the LOI should clearly state that it is not the entire agreement and that a final, definitive agreement with all the relevant terms will be drafted at a later point. Third, until a final agreement has been reached the parties should ensure that their conduct before, during, and after the LOI does not imply an intention to be bound.