Your letter of intent says it is non-binding. Several of its paragraphs are not.

Your letter of intent is non-binding on price, structure and closing. Whatever its binding-effect paragraph names is a contract the day you sign, and buyer forms usually name exclusivity, confidentiality, diligence access, expenses, governing law, forum and termination. Some courts also enforce an express promise to negotiate in good faith. Read that list first.

Which paragraphs of a letter of intent actually bind me when I sign it?

The paragraphs that bind you are the ones your letter’s binding-effect provision names, not a fixed list. Buyer drafts usually name exclusivity or no-shop, confidentiality, diligence access, expense reimbursement, governing law, forum and termination. Price, structure and closing conditions sit outside that list. Your signature-day exposure sits inside it.

Read the last page first. The paragraph titled “Binding Effect” does the real work. Everything above it is a proposal. Everything named in it is a promise.

What does a buyer’s letter of intent typically do that I should push back on?

A buyer’s form letter of intent often does four aggressive things at once. It binds every paragraph from exclusivity onward. It grants open-ended access to records, facilities, employees and sometimes customers the day exclusivity attaches. It supersedes the nondisclosure agreement you negotiated. It adds a one-way expense obligation if you do not sign.

• Simultaneity is the trick. Exclusivity and open access begin on one signature. You gave up the market and opened the building at once.
• The expense clause is asymmetric. It fires when you decline to sign, not when the buyer retrades you on day 70. Many letters at your size say nothing about expenses; if yours is silent, leave it silent.

How long should the exclusive period be, and what should trigger an extension?

Ask for 30 to 45 days, measured from the day the buyer delivers a complete diligence request list, extended only on named milestones. That is a negotiating target, not a market statistic. Buyer forms at this size commonly ask for 60 to 90 days, and a lender-financed buyer will argue its approval timeline requires it.

Exclusivity is the one thing the buyer receives immediately and for certain. Price lasts only until diligence gives the buyer a reason to move it. Sell the extension, on verifiable conditions:

• A draft purchase agreement delivered to you by a stated date.
• A lender named in writing, with a term sheet or conditional pre-approval. A commitment free of closing conditions is uncommon at this size and arrives late, so do not let it be the only milestone.
• No price reduction and no adverse change in structure. If the buyer retrades, exclusivity ends at your option, exercised in writing.

Price is the buyer’s opinion, revisable weekly. The no-shop is a contract, enforceable on signature. Do not trade a certainty for an opinion without shortening the certainty.

Can I really be sued for talking to another buyer during exclusivity?

Yes, if exclusivity is a binding provision, a buyer can sue. Whether it wins is a different question, and so is what it collects. One reported dispute shows both the exposure and the cost of prevailing: the seller won, years and a jury trial later, on a mostly non-binding letter.

A private equity buyer sued an e-commerce fulfillment company over a letter stating that nothing bound the parties except the section titled Exclusivity Period. It claimed breach of exclusivity and of a duty to negotiate in good faith, and sought the value of the lost deal.

The seller prevailed on both claims. On June 2, 2023 the court struck the expectation-damages theory on partial summary judgment and dismissed the exclusivity claims. A jury returned a defense verdict on the good-faith claim in August 2023, after a seven-day trial, three years after the letter.

Consequence: exclusivity buys the buyer a suit it can file, not one it is sure to win. Shorten the window. Define permitted conduct precisely.

Law: Cambridge Capital LLC v. Ruby Has LLC, 565 F. Supp. 3d 420 (S.D.N.Y. 2021); 675 F. Supp. 3d 363 (S.D.N.Y. 2023).

Does labeling the letter “non-binding” protect me from a duty to negotiate in good faith?

Not by itself, and not in every state. Delaware and New York courts enforce an express agreement to negotiate in good faith even where the economics are labeled non-binding. Massachusetts refused on weaker language. The label controls whether you must close. It does not control whether you owe a process obligation.

The doctrine is decades old. A federal court in New York sorted preliminary agreements into two kinds: those agreeing every essential term, where only documentation remains, and those binding the parties only to negotiate open terms in good faith. It enforced the second despite a documentation reservation.

Law: Teachers Insurance and Annuity Association of America v. Tribune Co., 670 F. Supp. 491 (S.D.N.Y. 1987).

Delaware went further. Its Supreme Court held in 2013 that an express obligation to negotiate in good faith binds, and that expectation damages are available where the plaintiff proves with reasonable certainty that agreement would have been reached but for bad-faith conduct. The term sheet carried a “Non Binding Terms” footer. Separate signed agreements required good-faith negotiation in accordance with it. The footer lost.

Law: SIGA Technologies, Inc. v. PharmAthene, Inc., 67 A.3d 330 (Del. 2013).

The range is wide. A Pennsylvania appellate court held that parties can create such a duty in their letter of intent, its extent set by that language. The North Carolina Business Court held the claim may be viable where the parties clearly expressed an intent to contract to negotiate. Massachusetts’ highest court found no duty where a letter recited only an intention to negotiate toward a definitive agreement.

Law: Jenkins v. County of Schuylkill, 441 Pa. Super. 642, 658 A.2d 380 (1995); RREF BB Acquisitions, LLC v. MAS Properties, LLC, 2015 NCBC 58 (N.C. Bus. Ct. 2015); Schwanbeck v. Federal-Mogul Corp., 412 Mass. 703, 592 N.E.2d 1289 (1992).

What keeps that obligation from hardening into a duty to sign is a drafted clause, not a heading. It says three things: neither party must execute definitive documents; neither is liable for terminating negotiations; no course of conduct creates an unstated obligation. Then sign nothing promising to negotiate “in accordance with” the letter.

What could a buyer actually collect if the letter of intent is broken?

Damages turn on the governing law you accepted in the binding section, which is why that paragraph is not boilerplate. Delaware has allowed expectation damages for breach of an express good-faith obligation, on reasonably certain proof. A federal court in New York read that route narrowly and struck the theory. Different law, different number.

Practical read: negotiate a damages disclaimer inside the binding section. Exclude consequential, lost-profit and expectation damages by name. Cap exposure at the expense number, and raise the cap before you sign.

Should the letter of intent supersede my nondisclosure agreement, and how do I stage diligence access?

No. Your nondisclosure agreement should remain a standalone document, and the letter of intent should state that it is subject to that agreement rather than superseding it. Diligence access should then run in phases, with contact with employees, customers, suppliers and your lender coming last and only on your written consent.

• Phase one: financials, tax returns, entity records, contracts with counterparty names redacted.
• Phase two: unredacted contracts and customer-level data, to named individuals only.
• Phase three: site visits outside operating hours, cover story approved by you.
• Phase four: key employee interviews, and customer calls only after the purchase agreement is substantially agreed and financing has cleared credit approval. Blanket customer contact is a request you can decline.
• Throughout: contact with any employee, customer, supplier, landlord or lender routed through you or your broker, in writing.

Rule: a binding access covenant with no phasing lets the buyer set the sequence. Application: customer calls get scheduled in week two, while price is theoretical. Consequence: your largest account hears it from someone who has signed nothing.

Which provisions survive termination, and do my claims survive with them?

Confidentiality and expenses survive termination only if the letter says they do. Exclusivity should die on termination and never outlive its stated end date. Whether claims for breaches that already occurred survive depends on drafting, because Delaware courts read termination and survival language as written, even when the result forecloses a claim.

Construing a survival period in a signed definitive contract, the Delaware Court of Chancery held that where covered provisions terminate on a stated date, a later claim is barred, and that parties may shorten the limitations period without magic words. That was not a letter of intent, but a letter providing that its provisions “shall be of no force and effect” invites the same reading.

Law: GRT, Inc. v. Marathon GTF Technology, Ltd., 2011 WL 2682898 (Del. Ch. July 11, 2011).

Two sentences fix it. First: name the surviving sections and how long each survives. Second: “Termination shall not relieve any party of liability for breach of a binding provision occurring prior to termination.”

Exclusivity should expire. Confidentiality should outlive the deal. Claims for breaches that already happened should survive both. Say each of the three in its own sentence.

What about the tax and financing paragraphs, if they are non-binding anyway?

Treat them as substantive; a non-binding number anchors months of argument. Stated as of August 2026, a taxable sale of the assets of a going business is generally an applicable asset acquisition, so you and the buyer must each report the allocation among asset classes under the residual method on Form 8594.

Each of you files it with the return for the tax year including the sale date. Nothing requires the letter to allocate anything, but a non-binding table becomes the buyer’s opening position on goodwill.

Law: 26 U.S.C. 1060; Treas. Reg. 1.1060-1; IRS Form 8594 and instructions.

If your buyer is using an SBA 7(a) loan, the lender’s rulebook limits what your letter can promise. SOP 50 10 8 took effect June 1, 2025 and governs applications through September 30, 2026; SOP 50 10 8.1, issued August 14, 2026, governs applications assigned a loan number on or after October 1, 2026 and revises change-of-ownership and equity terms. Under SOP 50 10 8, a complete change of ownership requires equity injection of at least 10 percent of total project costs, and a seller note counts toward it only on full standby for the life of the SBA loan, and only up to half of that injection. In a complete change of ownership you may not remain an officer, director, stockholder or employee, apart from a time-limited consulting role; a partial change is treated differently. Ask the lender which version governs before you promise a seller note or a post-closing role.

Rule: SBA SOP 50 10 8 (effective June 1, 2025); SOP 50 10 8.1, Policy Notice 5000-880695 (effective October 1, 2026).

What should I do before I sign the letter of intent in front of me?

Before signing the letter of intent, do five things. Each is cheap today and unavailable once exclusivity attaches, because from that moment you are negotiating with one buyer, on the buyer’s clock, with no market behind you. Work the list in order.

• Mark up the binding list. Governing law, forum, confidentiality and exclusivity is defensible. Access belongs there only if phased.
• Cut exclusivity and attach milestones, with an immediate exit if the price moves.
• Fix the expense clause. Strike it if you can. Failing that: one number, both directions, documented invoices.
• Protect your nondisclosure agreement. Strike the supersession language. State that the letter is subject to it.
• Add the two protective sentences. No obligation to execute definitive documents. No release of liability for pre-termination breach.

Then answer the question the letter does not ask. If this buyer walks on day 45, what does your process look like on day 46? If the answer is “nothing to restart,” the term to negotiate hardest is not price. It is the calendar.