Letter of Intent Unenforceable

A Superior Court judge recently ruled that a real estate company that signed a letter of intent to jointly develop a parcel of property with its owner, but was unable to successfully negotiate the terms of the venture, could not sue to enforce an option to buy the property.  In 485 Lafayette Street Acquisition, LLC v. Glover Estates, LLC, the plaintiff, a limited liability company established for the purpose of developing the property, argued that a letter of intent signed by the parties was an enforceable contract.  The court disagreed, holding that, because the letter of intent only contained general terms and conditions, and clearly contemplated the negotiation of a joint venture agreement, it could not be binding on the parties.  Of particular note was the court’s finding that the plaintiff limited liability company lacked authority to engage in ongoing business by exercising the option, as it had been dissolved several weeks before attempting to do so.  The lesson to be learned here is that the parties to a business transaction cannot rely upon a letter of intent to create binding contractual obligations.


Contact Frank Ravinal or Lloyd Sanders with questions about this entry.