Letter of intent
In the legal system, declarations of intent from negotiating partners that are intended to express their interest in negotiations or in the conclusion of a contract are understood as a declaration of intent (also an agreement in principle ; or English Letter of Intent ("LoI")) . The declarations are made by one or more negotiating partners. The legally binding nature of the individual regulations must be clearly regulated and, if necessary, determined through interpretation . The legal term is not legally defined .
General
In the run-up to complex company acquisitions , larger IT projects or other time-consuming transactions, the potential contractual partners often issue so-called “letters of intent”. Before the start of or during the ongoing negotiations, the mutual seriousness of the discussions and the will to conclude a corresponding contract should be documented. Under no circumstances should declarations of intent establish a claim to the conclusion of the intended contract, from which a liability for damages may arise. Rather, it should remain possible to break off negotiations at any time without giving reasons. In order to ensure this, the declarations must be formulated in such a way that, in the event of a legal dispute about the scope of a declaration, no doubts arise in the judicial interpretation.
species
There are various institutionalized forms under the generic term of the declaration of intent, with which a declarer communicates his goals for action or plans. The common goal is to limit the room for maneuver and channel the negotiation process. In the specialist literature , a distinction is made between a 'soft' and a 'hard' Letter of Intent (LoI), a Memorandum of Understanding or negotiation agreements ( Instruction to Proceed ). The 'soft' letter of comfort is also an institutionalized sub-form of the letter of intent. Declarations of intent are one-sided declarations of intent that require receipt . As a rule, they do not constitute an offer to conclude a main contract or to conclude a preliminary contract .
Letter of Intent (LoI)
There are two types of Letter of Intent (LoI);
Soft LoI
A soft LoI is a non-binding declaration of intent that only confirms that the parties to the LoI are in contract negotiations. It can be drafted as a unilateral declaration, which reflects a determination of the negotiating position of the exhibitor. In practice, the LoI is also often used as a document to be signed by both parties. They should explain the status of the negotiations and their seriousness, but are not legally binding, so that there is no entitlement to the conclusion of the desired contract. Nevertheless, the otherwise non-binding LoI can contain individual regulations such as exclusivity clauses and confidentiality agreements, which are indeed binding for the agreed duration.
In this form, the LoI is a non-binding declaration of intent that is not yet legally binding ; it lacks the legal consequence will . Therefore, the LoI cannot force the potential buyer to actually conclude the sales contract later. Nevertheless, secondary obligations can still be associated with a LoI. If the LoI establishes a legal obligation in accordance with Section 311 (2) BGB in this case , the general principles of trustworthiness are applied.
The soft LoI is subject to the provisions of § 311 Paragraph 2 No. 3 BGB. "Similar business contacts" are those that are not aimed at the immediate conclusion of a contract, but merely prepare for it. The soft LoI falls under this fact. A soft LoI can also result in an obligation to protect within the meaning of Section 241 (2) BGB. This involves the obligation to behave when executing the contract in such a way that the body, life, property and other legal interests of the other party are not injured. Accordingly, if a party has made a declaration of intent, although at the time the declaration was made it was certain that it did not want to conclude the desired contract, there is a breach of duty of protection according to Section 241 (2) BGB. The sender of the LoI commits a breach of duty if he arbitrarily lets the contract fail and thus violates the recipient's trust. In this case, he has to compensate the recipient for the fidelity damage, i.e. the damage that the recipient suffered because he trusted in the conclusion of the main contract.
Hard LoI
If the LoI is specific and contains some legally binding declarations, it is a hard LoI. However, these declarations must relate to essential parts of the contract ( object of purchase , purchase price ). This does not include the binding ancillary agreements such as the confidentiality clause, which are already binding in a soft LoI. A hard LoI is not a preliminary contract, but the parties have obligations ( Section 311 (2) No. 1 in conjunction with Section 241 (2) BGB). This includes the duty to protect and in particular the duty of care (termination of contract negotiations, breach of duty to provide information).
Memorandum of Understanding (MoU)
If a letter of intent is issued and signed between several negotiating partners, one speaks of a Memorandum of Understanding (MoU), a term from the US legal system. It is also a pure declaration of intent, for which the same principles apply as for a LoI. In practice, the terms are sometimes used synonymously. The title of the document is legally irrelevant. The decisive factor is the content design, which shows that it is a non-binding declaration of intent - i.e. a LoI or a MoU.
It is a document that defines the cornerstones of a contract that has yet to be concluded. This basic agreement is not legally binding, so it cannot be sued in court. In Germany , the term puncture is often used synonymously, although the term , which comes from Austrian , actually describes legally binding agreements. MoUs are particularly often concluded as part of the negotiation of company purchase agreements. In addition, MoUs are also concluded as intergovernmental agreements, as these - unlike international treaties - do not have to be ratified , but are concluded informally.
Differentiation from the preliminary contract
Even the hard LoI does not qualify as a preliminary contract. The preliminary contract is not regulated by law, but it is a contract under the law of obligations that creates the obligation to conclude a main contract at a later date. A preliminary contract thus obliges the parties to conclude the main contract. A preliminary contract already contains the essential parts of the subsequent main contract. In this case, in contrast to the LoI or MoU, the implementation of the main contract is enforceable. The conclusion of a preliminary contract is useful, for example, if the main contract still faces actual or legal obstacles (e.g. a lack of building permit). In such a case, the obligation to conclude the main contract can be made in the preliminary contract subject to the condition that a certain event occurs or the obstacle disappears. A preliminary contract can also be designed in such a way that only one party is bound, but the other does not assume any obligations to conclude a contract.
interpretation
In the event of a legal dispute , the courts are obliged to interpret the content of the declaration based on the rules of interpretation ( § 133 , § 157 BGB). It must be determined through interpretation whether a commitment was actually intended or whether only a declaration of intent was given. The soft LoI does not have any legally binding effect, it does not establish any obligation to conclude a contract. Even individual points as preliminary agreements are generally not binding ( Section 154 (1) BGB). The clearest are clauses that reveal the lack of binding will ( no binding clause ). They make it clear that the LoI contains neither a binding agreement nor an obligation to conclude the contract with regard to the intended conclusion of the contract. A lack of certainty, linguistic relativization or an only incomplete agreement indicate the lack of performance commitment. If these declarations contain the self-referential statement that a performance obligation should not be established, non-binding declarations of intent are available.
Contents of a letter of intent
Although the letter of intent is usually not legally binding, it is intended to underline the moral and psychological importance of the transaction. B. in the area of company acquisitions include:
- Designation of the contractual partner
- Expression of interest in carrying out the specified transaction
- Summary of previous discussion results
- Specification of the transaction plan
- Schedule (of the due diligence )
- Granting power of attorney in favor of a party examining the object of purchase (e.g. as part of due diligence)
- Time limits , conditions and reservations
- Confidentiality obligation regarding the information received, definition of exceptions, possibly sanctions in the event of non-compliance (contractual penalty)
- Right to surrender or destruction of received documents
- Reference to the lack of binding effect of the LoI
- Reasons for ending the ongoing negotiations
- Rules for reimbursement of expenses
- Exclusivity clause
See also
Web links
Individual evidence
- ↑ a b Götz Schulze: Die Naturalobligation: Rechtsfigur und Instrument des Rechtsverkehr , 2008, p. 349.
- ^ Daniel Beisel, Hans-Hermann Klumpp: Der Unternehmenskauf , 2003, chap. 1, marginal no. 66 ff.
- ↑ Ralf Bergjan: Liability from Culpa in Contrahendo at LoI according to the new law of obligations , ZIP 9/2004, p. 395.
- ↑ Thomas Rödder / Oliver Hötzel / Thomas Mueller-Thuns: Company purchase / sale , 2003, § 3, Rn. 18th
- ↑ Otto Palandt / Helmut Heinrichs, BGB commentary , 63rd edition 2004, § 241 Rn. 7th
- ↑ Wolfgang Hölters: Handbuch des Unternehmens- und Beteiligungskaufs , 1996, VI, p. 25 f.
- ^ BGH, judgment of December 17, 1987, Az.VII ZR 307/86, full text = BGHZ 102, 384 (388).
- ^ BGH , decision of March 26, 1980, Az. VIII ZR 150/79, full text = NJW 1980, 1577; OLG Munich , judgment of July 11, 1996, Az. 6 U 5762/94, guiding principle = NJW-RR 1997, 117.
- ↑ BGH, judgment of March 29, 1996, Az. V ZR 332/94, full text = NJW 1996, 1884.
- ↑ Götz Schulze: Die Naturalobligation: Rechtsfigur und Instrument des Rechtsverkehr , 2008, p. 577.
