This article posted on our partner site considers a parties obligation to reach a definitive agreement despite a letter of intent (LOI) that states that the intent was non-binding. An agreement to agree is generally unenforceable when: 1) all essential terms have not been decided, and 2) the parties did not intend to be legally bound. Absence of good faith in negotiations may be considered despite a non-binding LOI. Canadian courts may extend a duty of good faith (honest and reasonable performance) to LOI’s. Parties are encouraged take three steps when drafting a non-binding LOI. First, state that parties have no contractual obligations. Second, explicitly state the non-binding nature of the LOI. Third, potentially restrict the possibility of recovering damages (e.g. exclude damages for lost profits).


–  –  –

This article is provided for informational purposes only and does not create a lawyer-client relationship with the reader. It is not legal advice and should not be regarded as such. Any reliance on the information is solely at the reader’s own risk. is a legal tool geared towards entrepreneurs, early-stage businesses and small businesses alike to help draft legal documents to make businesses more productive. Clausehound offers a $10 per month DIY Legal Library which hosts tens of thousands of legal clauses, contracts, articles, lawyer commentaries and instructional videos. Find where you see this logo.

What you don't know can hurt you! Subscribe to stay informed.

Sign up now and receive an email when we publish new content.

We will never give away, trade or sell your email address. You can unsubscribe at any time.