Is my “non-binding” Letter of Intent actually binding?
Maybe—and that “maybe” can cost millions. Under Copeland v. Baskin Robbins the Court of Appeal held that a term sheet with all material terms and an intent to negotiate in good faith may create enforceable obligations. Later cases have applied that logic to LOIs with price, quantity, and closing timelines.
Scenario
Two Huntington Beach craft breweries sign a detailed LOI: purchase price, delivery schedule, exclusivity, a July 31 closing target, and a clause promising “good-faith efforts to finalize.” When the seller backs out in June to chase a higher bid, the buyer sues. Citing Copeland, the judge orders specific performance—transforming a “non-binding” outline into a seven-figure obligation.
Drafting safeguards
- Label non-binding sections with “Subject to Execution of Definitive Agreement.”
- Carve out detailed exclusions (e.g., “No party shall be bound to sell until full docs are signed”).
- If you want partial binding (exclusivity, confidentiality), isolate those provisions and add a severability clause.
Uncertain whether your LOI locks you in—or desperate to hold the other side to theirs? AEI Law, P.C. draws laser-sharp non-binding language, or litigates when a would-be partner walks away.
