Common use of Binding Terms Clause in Contracts

Binding Terms. While the parties in the LOI do not legally commit to the sale of the business, there are other terms in the LOI that the parties do make legally binding. These terms govern the parties’ relationship leading up to the time (if any) that a purchase agreement is signed by the parties. If a purchase agreement is signed, the purchase agreement governs the parties’ relationship thereafter.[5] If a purchase agreement is never signed, the binding terms in the LOI continue to govern the parties. Some of the more important and common binding terms include the following: