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1003 Bishop St • Pauahi Tower • Suite 1360 • Honolulu, HI 96813
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  • Home
  • Our Attorneys
    • Nathan Natori
  • About Us
    • Your Initial Meeting
    • Clients
    • Testimonials
    • Fees
    • Outer Island
      • Big Island
      • Maui
      • Kauai
  • Practice Areas
    • Real Estate
      • Purchase & Sale of Hawaii Real Estate
      • Agreement of Sale
      • Commercial
      • Encroachment
      • Eviction
      • For Sale by Owner
      • Landlord / Tenant
      • Brokers & Realtors
      • Water Rights
      • Partition
    • Business
      • Forming A Business
      • Acquiring A Business
      • Corporate Governance
    • Financial Institutions
    • Construction
    • Debt Collection
    • Finance
    • Foreclosure
    • Franchise
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What is a Letter of Intent?

The Positives and Negatives of These Legal Documents in Hawaii

In Hawaii parties often sign documents entitled “Letter of Intent” or “Memorandum of Understanding” or “Agreement in Principle” or “Term Sheet”. The supposed justification for signing such a document are:

  • It is shorter and more informal and so it can be quickly drafted;
  • It allows the parties to quickly document the major points while leaving it for the attorneys to later prepare the formal agreement;
  • It allows the parties to negotiate later the other details;
  • It “legitimizes” the deal by having parties sign a formal document and gives everyone something to hold after the meeting; and
  • It makes the parties negotiate the final agreement because they feel progress had been made.

The Good and the Bad of Letters of Intent

These benefits are for both “nonbinding” and “binding” letters of intent. The negatives though may outweigh the positives, even if this were clearly a nonbinding agreement.

  • A court may decide the letter of intent was binding even though the parties did not intend it that way;
  • A party may just use the “nonbinding” letter of intent to shop around the deal to see if others will give them a better offer.
  • A court may hold you in violation of the obligation of good faith and fair dealing if you do not finalize the full agreement, even if the letter of intent was nonbinding.

Some parties may want to create a hybrid letter of intent so as to have binding provisions and nonbinding provisions. The binding provisions could include confidentiality and exclusivity (sometimes called a “No Shop” clause), things you might have dealt with in a Hawaii Confidentiality and Non-Disclosure Agreement.

Why Solid Legal Guidance Is Needed

In summary, the Hawaii letter of intent is a document that must be handled with care as it can result in severe unintended consequences to you. Spend the money hiring an attorney at the start so as to avoid hiring an attorney at the end when things go badly.

Thus, meet with us so that we can determine what your goals are so that we can tailor your documents based on the adverse party. Once we have a game plan as to what would work the best you can then put into motion the most logical method to achieve your objective. Contact us today for a consultation. We can guide you with sound legal advice from our years of experience.

More articles from Other Hawaii Law and Legal Issues

  • Bill of Sale in Hawaii – How are they Used?
  • Hawaii Uniform Power of Attorney Act
  • How to File a Hawaii Conservatorship of a Minor Named a Beneficiary of an Account or Insurance Policy
  • What Hawaii Documents Must be Notarized?
  • What Is a Hawaii Notary Certificate?

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Aditya S.

Nathan is thorough, detailed, and knowledgeable.

Natori Law Office LLLC
1003 Bishop St
Pauahi Tower, Ste 1360
Honolulu, HI 96813

Ph: (808) 275-0155

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The information and content on this website is not formal legal advice. It is for informational purposes only. There is no legal association with the Natori Law Office LLLC based upon your viewing this website. You do not have any attorney-client relationship with the Natori Law Office LLLC unless you have formally retained the Natori Law Office LLLC to represent you by signing its engagement letter and complying with its terms.