Please see my presentation on letters of intent, their use and some do's and don'ts.

1. Letters of Intent: Who, What, When, Where,
Why

2. Disclaimer
This information is provided for informational purposes only. Sam J.
Saad III, P.A. does not warrant this information for any purpose. This
presentation shall not constitute legal advice This presentation does
not create an attorney-client relationship. The laws referenced in this
presentation may have changed or could be affected by case law at any
time without notice. Do not rely on this presentation or your
interpretation of it for any purpose. If you have a legal question you
should consult with an attorney at the Law Office of Sam J. Saad III.

3. Outline
• Presentation applies to
• Business sales
• Asset purchases
• Real estate purchase
• leases
• What is an LOI
• Purpose of an LOI
• Dealing in Good Faith
• Elements of an LOI
• Binding v. Non-Binding LOI

4. Who We Are

5. Law Office of Sam J. Saad III
• Founded December 9, 2007
• Focused on real estate and business law
• Dedicated to helping small business owners, entrepreneurs, buyers,
sellers and property managers
• Full service transaction and litigation firm
• Provides common sense and economically viable solutions with a
personalized approach to each client
• Directly across Airport Road from the Collier County Courthouse, in
Bonita and looking for offices on Marco

6. Sam J. Saad III
• Licensed Florida Attorney since 2003
• Focus on Real Estate and Business Transactions
• Member, NABOR Commercial Committee, Legal Resources Committee
• Born and raised in Omaha, Nebraska
• Graduated Creighton University, cum laude
• A Neapolitan since 2003
• Former Member, Naples City Council
• Married with two children, Sam IV and Lola

8. Letters of Intent

9. What is an LOI?
• A letter of intent is customarily employed to reduce to writing a
preliminary understanding of parties who intend to enter into
contract…” BLACK'S LAW DICTIONARY 904 (6th ed. 1990). Midtown
Realty v. Hussain, 712 So. 2d 1249, 1252 (Fla. 3d DCA 1998)
• A written statement detailing the preliminary understanding of
parties who plan to enter into a contract…
• A noncommittal writing preliminary to a contract
• It is typically entered into between a buyer and a seller after the first
round of negotiations.

10. WHAT IS THE PURPOSE OF A LETTER OF
INTENT? WHY USE THEM?
• Allows the parties to summarize the key terms and conditions of the
transaction, thereby reducing or even eliminating future
misunderstandings during negotiations of the definitive transaction
documents
• used as a blueprint to prepare the transaction documents
• identifies problems (or deal-breakers) in the early stages of the negotiations,
before incurring the costs of negotiating the transaction documents and
performing due diligence
• If the period of time between the signing of the letter of intent and
the closing of the transaction is significant, the letter of intent can
govern the parties’ relationship during this time

11. WHAT IS THE PURPOSE OF A LETTER OF
INTENT? WHY USE THEM?
Pros
• The lender for the buyer might
require a letter of intent for financing;
• A letter of intent may be used to start
the clock running for Hart-Scott-
Rodino purposes;
• A letter of intent focuses the seller
and buyer on the essential economic
terms of the deal; and
• Some parties feel a "moral"
commitment to a deal after signing a
letter of intent.
Cons
• The letter of intent might end up in court
as evidence of a deal;
• A letter of intent can be legally binding;
• The seller might be viewed as damaged
goods if the seller signs a letter of intent
and the deal subsequently falls through;
and
• A letter of intent might increase the
obligation of a public company to
announce the deal.
• A letter of intent might create an implied
duty to negotiate in good faith;

12. Obligation to deal in good faith
• Apothekernes - prevents one party from “renouncing the deal, abandoning
negotiations, or insisting on conditions that do not conform to the preliminary
agreement” or insisting on terms outside of the preliminary negotiations
(especially because market conditions changed).
• 180 Water St. Assocs., L.P. v. Lehman Bros. Holdings, Inc. - since letter required
parties to negotiate in good faith and only with each other on exclusive basis
toward final lease, allegation that defendant was negotiating with other landlords
stated cause of action for breach of agreement to negotiate.
• Feldman - The scope of any obligation to negotiate in good faith can only be
determined from the framework the parties have established for themselves in
their letter of intent.
• A duty to negotiate does not encompass an automatic duty to approve a final
deal

13. WHO CAN DRAFT A LETTER OF INTENT?
• Florida Realtors says that a REALTOR© can draft letters of intent
because they are merely an offer being made on behalf of your
customer
• Don’t make them binding – that is a contract and the unlicensed
practice of law

14. WHAT ARE THE ESSENTIAL
ELEMENTS OF A LETTER OF
INTENT?
Details about the parts of the letter

15. Structure of LOI
• May be short, describing only the key terms and conditions of the
transaction, or long, containing a comprehensive description of the
transaction.
• Depends on the amount and complexity of the transaction
• Should include a description of the transaction
• Business purchase
• Asset purchase
• Land purchase
• Lease

16. Who do we address the LOI to?
• Property owner – YES
• Look them up – probably an entity owns the property. You need the correct
agent for the owner entity.
• Appraiser website
• Secretary of State website
• Make sure you get the right party to sign the LOI, so you know you are dealing
with the decision maker with authority to bind.
• Property owner’s REALTOR©/attorney – If so instructed but get the
LOI signed by the agent of the owner with ultimate authority to bind.
• Contact information of the addressee for notice purposes

17. Identify the Property
• A contract must be definite, certain, and complete in all its essential terms
• There is no definitive list of “essential terms”; they may vary based on the nature
and complexity of each transaction.
• A court will evaluate what is essential on a case-by-case basis. However, a
description of the land to be conveyed is generally an essential element of an
agreement to sell land.
• The gold standard in drafting a contract is to use a complete legal description of the
property to be conveyed matching some or all or of the property owned by the
seller.
• Subject to final survey and/or verification of legal description by title attorney
• Plantation Land Co. v. Bradshaw (Ga. 1974) – description of land based on a future
act is in sufficient (see also OfficeMax v. Sapp)
• OfficeMax Inc. v. Sapp – “site subject to review” by tenant clause made the
description inadequate to bind landlord

18. Conditions
• Describe any conditions that must occur before closing
• Example:
• Financing to be obtained by the buyer
• Satisfactory due diligence by the buyer
• Consents to be obtained from third parties (such as landlords)
• Receipt of approvals from directors and shareholders, and
• Any necessary approvals to be obtained from regulatory agencies (permits,
use approvals)

19. Price
• How much is the offer to buy, sell or lease for?
• Subject to a survey to verify square footage
• Stated as a dollar total or per sq. foot
• Depends on what you have to start with – lots of public records
research

20. Timeline
• Dates by which the drafter desires to enter into a definitive contract
or terminate negotiations
• Important for determining when obligation to negotiate in good faith
ends.
• Time of the Essence
• Leave to contract. Not necessary in non-binding LOI
• Seabreeze Rest. v. Paumgardhen, 639 So. 2d 69, 70 (Fla. 2d DCA 1994) added
a Time of the Essence clause from an LOI to a contract because of an
integration clause in the contract.
• When a Florida contract does not specify a particular time for
performance, the law implies a reasonable time

21. Commission
• Put it in so it is known up front
• Oakmont Capital Resources Inc. v. DDR Corp., 2010-CA-010131
(Manatee County) – McDonalds and DDR put commission information
in their respective LOI’s and referenced a Letter of Registration

22. Non-Shop Clause
• What is it used for?
• In a highly desirable commercial location, the would-be tenant might be concerned that the
landlord may negotiate with the tenant’s competitors.
• Example: “The Landlord and its principal shareholders or partners, employees, agents and
representatives a) will not initiate with third parties or respond to solicitations by third
parties relating to the lease of the referenced premises in whole or in part, b) will
immediately notify Tenant if any third party attempts to initiate any such solicitation,
discussion or negotiations with Landlord and c) will not enter into agreement with respect
thereto with any third party. The Landlord hereby agrees that it shall be legally bound by
the provisions of this paragraph and Landlord’s violation of this paragraph will cause
irreparable injury to Tenant.” Officemax, Inc. v. Saap, 132 f.Supp.2d 1079 (M.D. Ga. 2001)
• Unfortunately for the tenant, the court found that the clause was not enforceable as a
separate covenant or through promissory estoppel. The court noted an absence of
independent consideration supporting the non-shop clause. No mutual promise. It also
concluded the terms of the clause were too indefinite because neither duration nor an
adequate description of the property were included
• Must have independent consideration in the Non-Shop Clause

23. Confidentiality Clause
• What is it?
• Agreement to keep negotiations confidential
• Agreement not to disclose information exchanged during negotiations
• What is it used for?
• Protects parties when negotiations breakdown
• Return information given to each party
• Define and avoid confusion over what is confidential
• If disclosures of confidential information have been made prior to entering
into a confidentiality agreement, make sure that the confidentiality
agreement specifically covers all prior disclosures
• Buyer will need exclusions for advisors
• Can be a separate agreement – independent consideration required
• Have lawyer draft b/c contract

24. Escalator Clause
• What is it: An “escalation clause” is a clause that guarantees a change in
the agreement price once a particular factor beyond control of either party
affecting the value has been determined. An important example of this is a
contract that adjusts for inflation
• Only use Escalation clauses when the buyer is confident that there will be
multiple offers. If a buyer submits an offer with an escalation clause, the
seller knows immediately how far the buyer will go to secure the home.
• If that offer ends up being the only offer submitted, it technically remains
at its original price. However, the seller will know, however, to counteroffer
to the buyer at a higher, escalated price, since the buyer is clearly willing to
pay more.
• A buyer gives up a lot of negotiating power and potentially leaves money
on the table when using an escalation clause that goes unmet by a
competitor

25. Due Diligence Clause
• Outline the procedure and scope for due diligence
• Example: “The Seller will cooperate with the Buyer’s due diligence
investigation of the [Property/company] and will provide the Buyer
and its Representatives with prompt and reasonable access to key
employees and to books, records, contracts and other information
pertaining to the [Property/Company] (the “Due Diligence
Information”)

26. Reps and Warranties
• A letter of intent may describe the types of representations and
warranties that will be required in the transaction documents. The
buyer should also insist on a provision obligating the seller to conduct
its business in the ordinary course and to avoid any extraordinary
transactions between the time the letter of intent is signed and the
time of the closing of the transaction
• Seller’s authority to enter transaction
• Normally seen in business purchases more than land purchases and
leases
• May want to restrict new leasing activities in land purchase

27. Miscellaneous Provisions
Customary but necessary provisions, such as governing law,
jurisdiction, termination of the letter of intent and each party bearing
its own expenses

28. Binding v. Non-binding

29. Binding v. Non-Binding
• Don’t make the letter binding
• You are the REALTOR© not the lawyer
• Don’t draft a contract - UPL
• You want a clear statement of future intentions so your writing does
not give rise to an enforceable contract
• Make your letter clear that it is a proposal and that the details must
be finalized
• In a contract for real estate or a lease more than one year, must have
a writing to comply with Florida statute of Frauds.

30. Binding v. Non-Binding
• Irby v. Mem'l Healthcare Grp., Inc., 901 So. 2d 305, 305 (Fla. 1st DCA 2005).
While it is not necessary that all details of an agreement be fixed to have a
binding agreement between parties, if there has been no agreement as to
essential terms, an enforceable contract does not exist. So long as any
essential matters remain open for further consideration, there is no
completed contract. In order to create a contract, it is essential that there
be reciprocal assent to a certain and definite proposition. Failure to
sufficiently determine quality, quantity, or price may preclude the finding
of an enforceable agreement. Where the parties are continuing to
negotiate as to those essential terms, there can be no meeting of the
minds.
• An agreement to make an agreement is not enforceable as a contract
under Florida case law. So long as any essential matters remain open for
further negotiations, there is no binding contract. Irby, 901 So. 2d at 305.

31. Binding v. Non-Binding
• Somethings you will want to be binding
• Confidentiality
• Non-shop clause – binding and with time limit
• Have lawyer draft/review binding parts
• Example: “Except for Paragraphs 3, 4, 5 and 7 of this letter of intent,
this letter of intent is not binding upon either the Buyer or the Seller,
and is subject to the negotiation and execution of the Transaction
Documents between the Buyer and the Seller. Paragraphs 3, 4, 5 and
7 are binding upon the Buyer and Seller whether or not the parties
enter into the Transaction Documents and will survive the termination
of this letter of intent”

32. Binding v. Non-Binding
• Have a Disclaimer: Clearly state that this letter of intent is not binding
and that the parties expressly disclaim any obligation to be bound
until a definitive written agreement is fully executed by the parties.
• However, just because you say you will execute a definitive
agreement does not mean that your preliminary negotiations cannot
become binding. Agreements to agree are not binding but if the
parties have reached agreement on the essential or material
elements of the transaction a contract may have been formed

33. Binding v. Non-Binding
• Midtown Realty, Inc. v. Hussain, 712 So. 2d 1249 (Fla. 3d Dist. Ct. App. 1998).
• The buyer sent a signed "Letter of Intent" to the sellers containing a proposal for the purchase of a gas station. It
included terms such as the proposed purchase price, financing plans, and an inspection period. It further
provided, "if these TERMS and CONDITIONS are acceptable to the Seller, Purchaser shall present to the Seller a
more detailed and formal Purchase Agreement.” Before signing the letter of intent, the sellers’ representative
changed and added terms. In response, the buyer sent a signed Purchase and Sale Agreement to the sellers. The
sellers responded by making several changes, executing it and sending it back to the buyer. The buyer notified the
sellers that he could not agree to two of the changes the Sellers had made, and that unless an agreement could
be reached on these points, the transaction could not be consummated. An agreement could not be reached, and
the sellers withdrew the property from the market. The buyer then brought this suit for breach of contract. The
sellers' defense was that there was no contract.
• Outcome. The trial court dismissed the case and the Third District Court of Appeal affirmed. To have a contract,
there must have been a meeting of the minds on the essential elements of the agreement. Several factors led the
court to conclude that no contract existed. First, a letter of intent is customarily used to memorialize a
preliminary understanding, rather than a contract. Second, this letter of intent included language making it clear
that it was merely a proposal intended to further negotiations, rather than an offer. The sale of a gas station,
necessarily involving many complicated details, such as environmental matters, licensing, permits and financing,
would ordinarily be reduced to a detailed contract, rather than a brief document like the letter of intent.
Furthermore, the buyer himself had stated that the transaction could not be consummated unless agreement
could be reached on points not resolved by the letter of intent.

34. QUESTIONS???

35. THANK YOU!!!
Available any time at
(239) 963-1635 or (239) 784-5556
www.SaadLegal.com