Short Answer
State the position expressly.
A Letter of Intent is a preliminary deal document used to record the main commercial understanding before the final acquisition agreement is signed.
If the parties do not want the acquisition itself to become binding at that stage, the document should clearly identify which provisions are non-binding, which provisions are binding, and that neither party is obliged to complete unless definitive agreements are executed.
Do not assume that the title “Letter of Intent” or the phrase “subject to contract” removes every ambiguity.
Why This Matters
Preliminary deal documents often become more detailed as negotiations progress.
They may include price, payment mechanics, closing dates, employee treatment, conditions, exclusivity, confidentiality and operating restrictions.
At some point, a document intended only as a roadmap can start to read like the final deal. If the parties still intend not to be bound to complete, that intention should remain clear despite the detail.
Typical Scenario
A buyer and seller agree the commercial outline of an acquisition.
They want enough detail to start due diligence and obtain internal approval, but they are not ready to be legally committed to complete.
The draft nevertheless contains detailed obligations and target dates.
Management asks:
“Is it still non-binding because we called it a Letter of Intent?”
The label alone is not enough.
Practical Analysis
01Separate the deal terms from the process terms.
Indicative price, structure and target closing can be stated as non-binding commercial intentions. Confidentiality, exclusivity, access to information, costs and governing-law provisions can be expressly binding if that is what the parties want.
02Use an express no-obligation-to-complete clause.
Where the deal itself is non-binding, say that no party is obliged to complete or continue negotiations unless definitive agreements are signed, subject to the provisions expressly identified as binding.
03Keep mandatory language consistent with the intended status.
“The buyer shall acquire on 30 November” reads differently from “the parties currently intend to target completion by 30 November, subject to due diligence and definitive agreements.”
04Make the binding carve-outs workable.
If exclusivity is binding, define the period and prohibited conduct. If confidentiality survives, align it with any existing non-disclosure agreement.
05Watch conduct as well as drafting.
Before final agreements are signed, taking operational control, transferring assets or making non-refundable payments can undermine the commercial reality of a supposedly preliminary arrangement.
A preliminary document can also create internal expectations even if the legal drafting says it is non-binding. Investment committees, lenders and operating teams may start acting on stated dates, price assumptions or exclusivity periods. The drafting should therefore avoid a mismatch between the intended legal status and the way the business is likely to treat the document in practice.
Where the parties want only some clauses to bind, the document should also state what happens when negotiations end. Confidentiality, exclusivity, return of information, costs and dispute-resolution provisions may need different survival periods. A clean termination mechanism makes the preliminary status easier to administer if the transaction does not proceed.
What We Usually Look At
We review the proposed structure and price, conditions, due diligence, exclusivity, confidentiality, deposits, costs, internal approvals, governing law, dispute resolution, termination rights and any wording that appears to create a present duty to complete.
Common Traps
Typical mistakes are relying on the title alone, writing “non-binding” in one clause while using mandatory language elsewhere, failing to identify the binding provisions and using a deposit or operational obligations without explaining what happens if the final deal is never signed.
Practical Next Step
Divide the document into two columns:
binding now
and
commercial understanding only
If a material provision cannot confidently be placed in one column, the drafting is not yet clear enough.
Legal Sources
- Thai Civil and Commercial Code, sections 354–366 on offer, acceptance and contract formation, including section 366 on unresolved essential terms.
- Thai Civil and Commercial Code, section 5 on good faith.
- Thai Civil and Commercial Code, section 368 on interpretation of contracts according to good faith and ordinary usage.
General legal information only. Please seek advice on your specific facts. Laws and regulatory practice may change.