The seller is suggesting that we sign a letter of intent before we prepare a contract. Is this a good idea?
Often it is. By signing a letter of intent – especially in a complex transaction – you know earlier on that you and the seller agree on the major terms of the deal. Obviously, it is better to know this before you put time and expense into preparing the contract itself.
A word of caution, however: The letter of intent should state specifically that it is not a binding agreement. Only the contract itself should be binding. The devil is in the details; you want to be free to get out of the deal if, later, you and the seller cannot reach agreement on the details of the contract.
Consider having a lawyer draft – or at least review – the letter of intent.
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