Letters of intent (LOIs) are typically used during the negotiation of a veterinary transaction to establish preliminary terms of the deal. If the terms of the LOI are unclear or ambiguous, particularly in regard to whether certain clauses are binding or nonbinding, the proposed transaction can fall through, opening the door to litigation. Ultimately, it takes a skilled veterinary lawyer to draft a well-conceived letter of intent.
Mahan Law provides advice and counsel to clients involved in the purchase and sale of veterinary practices throughout the nation. We regularly negotiate veterinary transactions and prepare essential documents, including letters of intent. When you become our client, we will work to protect your interests while helping you engage in a successful transaction. Please contact our office today to speak with one of our experienced veterinary lawyers.
What is a Letter of Intent?
A letter of intent is a document typically formatted as a letter describing the terms of a business transaction, such as buying/selling a veterinary practice. Generally, an LOI includes some, but not all, of the specific terms of the proposed transaction, such as:
- Description of the practice
- Nature of the transaction (e.g. asset sale or stock sale)
- The purchase price, valuation method or price range
- Period of due diligence
- Whether or not the real estate is included in the deal
- Whether signing a non-compete is required
- Financial terms
- Projected closing date
If the LOI is not clearly written, the parties may interpret the language differently: one party may believe the letter is completely non-binding, while the other party only considers certain terms to be legally binding. The best way to avoid such disputes and minimize the potential for litigation is to consult with the experienced veterinary attorneys at Mahan Law.
Letters of Intent: Binding v. Non-Binding
Typically, the parties to a veterinary transaction do not intend the above-listed terms to be binding because the deal is still being negotiated. However, an LOI may include several types of binding clauses, such as:
- Exclusivity clauses that prohibit the buyer from approaching other sellers, or the seller from pursuing other buyers
- Confidentiality clauses that prohibit a potential buyer from disclosing or misusing information obtained during negotiations
- Good faith clauses that prevent both parties from abandoning negotiations
- Prerequisite clauses that require the parties to complete specific acts before the final contract is drafted (e.g. perform appraisals, release financial information)
In short, an LOI must be precisely worded so that it encourages the parties to move forward with the deal without sounding like a contract.
Do I Need a Veterinary Attorney to Draft a Letter of Intent?
A letter of intent that is not properly drafted can inadvertently create obligations for the parties; an LOI that contains too many deal terms may even be deemed a contract by the courts. This is why it helps to work with a skilled veterinary lawyer, one who knows what to include and what not to include in a letter of intent.
To avoid misunderstandings between the parties, an LOI should include clauses stating whether specific terms are meant to be binding or non-binding. In addition, it should include a list of any steps the parties must complete before they can finalize the contract, as well as a date by which due diligence must be completed. Above all, a properly drafted LOI should create an understanding that the current terms are not definite and are subject to change.
On the other hand, a letter of intent should not include material terms of the deal, otherwise, the courts may find the LOI is an enforceable contract. Moreover, an LOI should not require a deposit or fee to be paid before entering into negotiations because such fees can make the LOI implicitly binding. Finally, it is crucial to avoid using words like “agree,” “will,” or “shall,” which may create the impression that the referenced terms are definite and final.
At Mahan Law, we know that a carefully written letter of intent can mean the difference between a successful veterinary practice transition and the deal falling through. Our legal team is highly skilled in drafting and reviewing letters of intent and other transaction documents. We also provide ongoing counsel to help our clients comply with any binding terms of an LOI so that the proposed veterinary transaction proceeds smoothly.
Contact Our Experienced Veterinary Lawyers
If you are considering buying or selling a veterinary practice, it is crucial to have proper representation. Veterinary professionals turn to Mahan Law because we have the legal knowledge and business acumen that are essential for negotiating successful transactions. While a letter of intent is an essential first step in a practice transition, it takes skill and determination to make it a done deal.
Our veterinary lawyers have a well-earned reputation for helping veterinary professionals achieve their business objectives. When you work with us, you will be able to enter into a proposed veterinary transaction with confidence. Please contact our office today to set up a consultation.