Document background
The Letter of Intent to Do Business is a crucial preliminary document in German business practice, typically used when parties have progressed beyond initial discussions but before committing to a definitive agreement. This document type is particularly important in the German legal context, where pre-contractual obligations and good faith principles carry significant weight. The LOI serves to document serious interest in a business relationship while providing a framework for further negotiations. It typically includes key terms, timelines, and any binding provisions (such as confidentiality), while clearly stating its generally non-binding nature. Under German law, while a Letter of Intent to Do Business is primarily non-binding, certain provisions may create legal obligations, and the principle of culpa in contrahendo may impose liability for bad faith negotiations. The document is commonly used in various business contexts, from merger discussions to joint venture negotiations, and helps structure the path toward a final agreement while managing expectations and responsibilities of all parties involved.
