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RANSACTIONAL counsel involved in mergers, acquisitions and asset sales are aware that “no binding effect” language in a letter of intent (LOI) does not have the “talismanic” effect of preventing the LOI from obligating the parties in any way. The issue examined in this article is the extent of the protection, and conversely the extent of the exposure, where such a provision is included in an LOI, especially where the provision is juxtaposed with an express requirement that further negotiations between the parties be conducted in good faith. The good faith negotiation clause may be sought by counsel for the purchaser/acquirer to provide sufficient confidence to expend the resources required to complete due diligence, negotiate documents, locate financing, and otherwise pursue the deal.

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