Letter of Intent (LOI) template clause

    Updated: 27 March 2026

    Please note: these example clauses are intended as a starting point, not as legal advice. Always adapt the text to your specific situation and have important contracts reviewed by a legal professional.

    Clause text

    Letter of Intent

    The undersigned:
    1. [Party A], having its registered office at [address], duly represented by [name, title] ("Party A");
    2. [Party B], having its registered office at [address], duly represented by [name, title] ("Party B");
    hereinafter jointly referred to as "Parties" and individually as "Party";

    Whereas:
    (a) the Parties are in negotiations regarding [brief description of the intended cooperation or transaction] (the "Transaction");
    (b) the Parties wish to set out the principles and framework for the negotiations;
    (c) this Letter of Intent does not bind the Parties to enter into the Transaction, except for the provisions of Articles 3, 4, 5, and 6, which are binding;

    Have agreed as follows:

    Article 1 - Intent
    The Parties express their intent to negotiate in good faith the terms and conditions of the Transaction. This expression of intent does not create an obligation to enter into a definitive agreement.

    Article 2 - Key Terms
    The negotiations shall proceed on the basis of the following key terms:
    (a) [key term 1, e.g. intended contract value or scope];
    (b) [key term 2, e.g. intended start date];
    (c) [key term 3, e.g. due diligence conditions].

    Article 3 - Exclusivity (binding)
    For a period of [number, e.g. 60] days following the signing of this Letter of Intent, the Parties shall not negotiate with third parties regarding a comparable transaction. Breach of this exclusivity provision entitles the aggrieved Party to compensation for reasonably incurred costs.

    Article 4 - Confidentiality (binding)
    All information shared between the Parties in connection with the negotiations shall be treated as confidential in accordance with the separately executed confidentiality agreement, or in accordance with Schedule [X] to this Letter of Intent.

    Article 5 - Costs (binding)
    Each Party shall bear its own costs in connection with the negotiations and the preparation of the Transaction, unless the Parties agree otherwise in writing.

    Article 6 - Term and Governing Law (binding)
    This Letter of Intent shall expire by operation of law on [date] or upon the Parties entering into a definitive agreement, whichever occurs first. This Letter of Intent shall be governed by the laws of the Netherlands.

    What does this clause mean?

    A letter of intent (also known as an LOI or heads of agreement) sets out the key terms before parties enter into a definitive contract. It serves as a framework for the negotiation phase: what do the parties want to achieve, under what conditions are they negotiating, and what happens if the negotiations fail?

    The critical distinction is in Article 1: the letter of intent itself does not oblige either party to enter into a definitive contract. But Articles 3 through 6 are binding. This means that exclusivity and confidentiality are enforceable, even if the deal falls through. Important: regardless of what the LOI states, parties owe each other precontractual good faith obligations under Dutch law (Art. 6:2 and 6:248 BW, redelijkheid en billijkheid). Under the Plas/Valburg ruling (HR 1982) and its refinement in CBB/JPO (HR 2005), negotiations can reach a stage where unilateral withdrawal is no longer permissible, regardless of what Article 1 says. Article 1 therefore does not provide absolute protection against liability for broken-off negotiations. According to World Commerce & Contracting, 9.2% of annual revenue is lost due to poor contract management. A clear framework during the negotiation phase prevents parties from investing months without clear ground rules.

    The exclusivity period in Article 3 protects both parties against the scenario where the counterparty uses the LOI as leverage while negotiating in parallel with competitors. The cost allocation in Article 5 prevents post-hoc disputes about who bears the adviser costs if the deal does not go through.

    When should you use this clause?

    Use a letter of intent at the start of negotiations for complex transactions: acquisitions, joint ventures, major outsourcing contracts, real estate transactions, and strategic partnerships. The larger the transaction and the more parties involved, the more important an LOI becomes.

    An LOI also serves as an internal communication tool: the document helps build buy-in within both organisations for the intended transaction. According to Ironclad (2025), 92% of contract management errors are attributable to human error. A clear letter of intent reduces the chance of misunderstandings in the transition from negotiation to definitive contract.

    Customize these elements

    • 1Explicitly mark which provisions are binding and which are not. Dutch courts apply the Haviltex standard and look at the reasonable expectations of the parties. If the distinction is unclear, there is a risk that a court will treat provisions as binding
    • 2Align the exclusivity period with the complexity of the transaction. For a straightforward acquisition, 30-45 days may suffice; for a complex due diligence, 90-120 days is more realistic
    • 3Add a break-up fee if a party withdraws without good cause after the exclusivity period. This compensates the other party for transaction costs incurred
    • 4Include an explicit non-solicitation provision if parties gain access to each other's employees or customer data during the negotiations
    • 5Add a survival clause: the confidentiality obligation in Article 4 should remain in force after the LOI expires, typically for a period of 2 to 5 years

    Sources

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