Should I use a letter of intent template to buy a business?

BDC, the federal Crown lender, advises against using a letter of intent template found online. It says an appropriate template is hard to find, and that a letter can become so detailed that it is hard to tell apart from a formal purchase offer. This page answers only whether a downloaded form is a safe starting point. For how to write the letter itself, see how to write a letter of intent.

What BDC says about templates

BDC says it is best to avoid using a letter of intent template found online, and it quotes an adviser who says it will be difficult to find an appropriate template. BDC also says a letter of intent usually consists of just a few pages, but that it can be so much more detailed that it is difficult to recognize the difference between the letter and a formal purchase offer. The same adviser says the document can take on many forms depending on the nature of the transaction and the needs of the parties.

Why informal wording still matters later

BDC says that, although not a binding offer, a letter of intent anchors the transaction terms to some degree. Its senior counsel adds that, where so provided, the letter will create binding obligations on one party or the other, particularly with regard to confidentiality and exclusivity. BDC’s article on purchase agreements says the tentative price reached in preliminary negotiations will have been reflected in the letter of intent. In Quebec, Éducaloi says most contracts do not have to be in writing, and that a verbal agreement or an email exchange is enough to form a contract, though certain contracts must be in writing, so do not assume a casual document creates nothing.

What a generic template cannot know

A form written for no particular deal cannot answer questions that belong to yours. Put each of these to your lawyer before you send anything:

• Which clauses should bind you and the seller, and which should not.
• The price range and the terms of payment for this deal, which BDC lists among the clauses a letter may include.
• The duration of exclusivity, what the seller agrees not to do during it, and the penalties for breaching it, which BDC also lists.
• Who must sign. BDC says the letter must be signed by the seller, the buyer and the other parties involved, as the case may be.

Where that leaves a template

Nothing here says a template is unlawful or that a letter built from one cannot be enforced. The point is narrower: BDC’s advice is to avoid one. If you want a starting structure, the letter of intent preparation checklist lists what to settle first, and your lawyer can draft from there.