The term "letter of intent" is an imported product in my country and originated from the U.S. securities market. At present, it is widely used in many fields such as commercial housing sales, company mergers and acquisitions, and equity transfers in my country. However, there are still disputes in judicial practice regarding the nature and legal effect of letters of intent.

View 1: A letter of intent is a consultative and negotiation document and does not have the legal effect of a contract.

Some judicial documents hold that if the letter of intent does not contain the basic elements of a contract, nor does it set up civil rights and obligations for the parties, but the parties only conduct preliminary negotiations on the content of cooperation to express their intention to cooperate, then the parties No civil legal relationship has been formed between them. At this time, the letter of intent is not a legally established contract and does not have the legal binding force of the contract.

View 2: The letter of intent is an appointment contract, and its legal effect ends when this contract is signed.

Some judicial documents hold that if the letter of intent contains the main terms of the contract, but the parties clearly agree in the letter of intent on the time or conditions for entering into a formal contract in the future, then the letter of intent should be deemed to be an appointment contract. Regarding its legal effect, if the parties sign this contract as agreed, it should be deemed that the parties have fulfilled their obligations to sign this contract as stipulated in the letter of intent, and the effectiveness of the letter of intent has terminated when this contract is signed.

View 3: A letter of intent is equivalent to a contract and has full legal effect.

Some judgment documents hold that the letter of intent is the true expression of the parties’ intentions, and its content does not violate the mandatory provisions of laws and administrative regulations, nor does it fall under the circumstances of contract invalidity stipulated by law, and should be deemed legal and valid. Some other judgments hold that if the letter of intent clearly stipulates the rights and obligations of both parties, as well as the basic elements of the contract such as time and amount, it should also be considered that the letter of intent has met the requirements for the establishment of the contract, and all parties should perform according to the contract. Otherwise, the contract should be fulfilled. Bear liability for breach of contract in accordance with relevant regulations.

When determining the legal nature of a letter of intent, one cannot just generalize from the name and other forms. It is necessary to judge whether the content of the letter of intent is specific and certain based on the provisions of relevant laws and judicial interpretations and the actual transaction situation; signing of the letter of intent Comprehensive review and determination will be conducted on whether the parties concerned have expressed intention to be bound by it; whether the letter of intent violates mandatory provisions of laws and administrative regulations; whether a formal contract is concluded after signing the letter of intent. If the subject matter and quantity in the letter of intent are uncertain, and the parties only want to express an intention to cooperate, but lack an expression of intention to be bound by it, it should generally be regarded as a negotiation document; on the contrary, if the subject matter, price, payment method and other elements in the letter of intent are not If it has been clearly agreed and there is no validity exclusion clause in the letter of intent, it should generally be regarded as a contract; and if the letter of intent has clearly agreed to sign this contract within a certain period of time, even if the content stated is subject to this contract, it should generally be characterized as a contract. Appointment contract.

In order to avoid disputes, it is recommended to directly clarify its legal effect in the letter of intent. If there are exclusion clauses in the letter of intent such as "This letter of intent does not create any rights or obligations", "This letter of intent is not legally binding", "The rights and obligations of both parties are specifically determined by a formal contract", it means that the parties do not We hope to be bound by the relevant contents in the letter of intent.

The nature and legal effect of the letter of intent will not affect the legal effect of the procedural clauses. Regardless of whether the letter of intent is deemed to be a negotiation document, an appointment contract, a contract, or even a validity exclusion clause has been stipulated in the letter of intent, as long as the letter of intent stipulates procedural clauses such as exclusive negotiation, confidentiality obligations, and dispute resolution, this clause will have no effect on the parties. It is legally binding, and if one party violates it, it may bear corresponding liability for contractual fault or breach of contract.

Legal Basis

Article 490 of the Civil Code, where the parties conclude a contract in the form of a contract, the contract is established when both parties sign, seal or fingerprint. Before signing, sealing or fingerprinting, one party has performed its main obligations and the contract is established when the other party accepts it.

Laws and administrative regulations or the parties agree that a contract should be concluded in writing. If the parties do not use writing but one party has performed its main obligations and the other party accepts it, the contract is established.