What is an exclusivity clause in a letter of intent?

A letter of intent is mostly a statement of where the parties hope to end up, and courts treat it that way where it says so. The exclusivity clause is different in kind: it is an enforceable commitment sitting inside a document labelled non-binding, which is why it deserves more attention than it usually gets.

What a buyer is paying for

Diligence costs money — accountants, lawyers, searches, sometimes an environmental or equipment assessment. Spending that while the seller continues to entertain other offers means funding someone else’s price discovery. Exclusivity is the condition that makes serious diligence rational.

What a seller is giving up

Momentum. A business off the market for ninety days while a buyer investigates and then withdraws has lost a season of marketing and signalled something to anyone who noticed. Sellers reasonably push for a shorter window, a clear diligence timetable, and sometimes a deposit so the period is not free.

The drafting that decides whether it works

A no-shop promise is one thing; whether it also bars responding to unsolicited approaches is another. So is what happens on breach, whether the clause survives expiry of the rest of the letter, and whether the period extends automatically if diligence is delayed by the seller. Each of those is negotiated, and silence on any of them favours whoever reads the clause more carefully.

Breach is hard to remedy, which argues for precision

Proving the loss from a broken no-shop is difficult — the buyer’s damage is the opportunity and the wasted diligence spend, neither of which is simple to quantify. That makes a clause specifying consequences, such as reimbursement of costs, more useful than one leaving the remedy to general principles.