New York Technology Council’s CEO Roundtable
New York, NY
May 22, 2012 6-8 PM

On May 22, I will be speaking to the New York Technology Council’s CEO Roundtable on “Preparing Your Tech Business for Sale.”

This seminar will address what you must do now to avoid problems when you want to sell your tech company later.  What will your buyer find when it looks “behind the curtain?”

By running your business professionally now, you can avoid many pitfalls.  In this presentation, I will provide you with tips to ready your business for your exit strategy.  You will come to appreciate what I mean when I say that if you want to play in the major leagues, you have to act like a major leaguer.  And acting like a major leaguer starts on the day you found your company.

I will talk about things like intellectual property due diligence and audits, and how having well-written agreements in place makes your business look like a major league player.  This seminar will touch upon issues like non-disclosure agreements and protecting your intellectual property.  I will also talk about what I learned when I co-founded a software company that Microsoft bought.

If want to attend, please send me an email at mg@eComputerLaw.com with information about you and your company.  I will submit your request for an invitation to the group for approval.  This is an invitation only event.

Mobile licensing deals raise many complex legal and business issues that need to be thoroughly negotiated and documented in the agreement.  These deals have their own customs, usages, and norms.  This seminar provides insight into the real language use in mobile licensing deals, industry norms and concessions one should expect. The discussion will include warranties, limitations of liability, performance standards, acceptance testing procedures and change orders, to name a few.

Topics will include:
•     Four key provisions you will need in every mobile licensing deal agreement.
•     How a limitation of liability clause can emasculate your agreement.
•     Tips for negotiating minimum commitments and early termination provisions.
•     How to handle personally identifiable information and other confidentiality issues.
•     How intellectual property provisions in agreements can be a trap for the unwary.
•     Three negotiating techniques guaranteed to work every time.
•     Four ways to keep mobile licensing contracts out of court.

WHEN:           Tuesday, May 22, 2012
8:30am – 10:00am

HOST:             Mark Grossman, Counsel, Technology Law

WHERE:        Tannenbaum Helpern Syracuse & Hirschtritt LLP
900 Third Avenue, New York, NY 10022

RSVP:             Nancy Wu at wu@thsh.com

Paper Shredders = Security, Privacy & Confidentiality (Photo credit: Wikipedia)

Let’s start with the common misconception that there is a “standard” confidentiality agreement sitting on my hard drive waiting to be printed. (When I started practicing law, people thought that the “standard” form was in my drawer and I filled in the blanks with a typewriter. Times and technology have certainly changed, but the myth of the “standard” form has not.)

In fact, to the contrary, the confidentiality agreement may be the first “little deal” you negotiate on your way to the Promised Land of whatever it is you’re negotiating in the big picture.

However, before we discuss the how-to on these agreements, let me say that I think confidentiality agreements are widely overused. Clients ask me to prepare one before they have even an initial discussion with the other side.

My recommendation is usually that preliminary discussions proceed without any agreement in place. After all, why would you want to share secrets with people until you have reason to believe that there’s a real possibility that both sides are serious about the deal. Until then, the verbal understanding should be that the parties won’t share confidential information.

If and when the deal gets serious, that’s the time to impose a confidentiality obligation on the parties. Remember that most confidentiality agreements have reciprocal obligations. Therefore, in trying to tie their hands with your information, you may unintentionally find yourself restrained from pursuing a direction you want to go because you may be accused of breaching the confidentiality agreement that you wanted to protect you.  That which you thought was your shield could turn out to be the other side’s sword.

Degree of Care

If you’re going to be the one mostly receiving confidential information, you want to have the lowest standard of care possible with the other side’s information. So here, you want language like, “You will use commercially reasonable efforts to protect the information.”

A good fallback position is that you will use “the same degree of care” to protect the other side’s information as you use to protect your own information of similar sensitivity. Of course, the beauty of this language is that it is so mushy that it’s hard to ascertain what it means. It’s not exactly an objective standard.

If you’re the one concerned about your own information in the other side’s hands, you want to use stronger language. You’ll want things like a requirement that the other side not disclose the information except to people with a “need-to-know.” You might even limit disclosure to certain named people within the company and certainly no consultants or other third parties.

Have Ready-to-Go Documents

I advise my clients to let me prepare two documents for them. One is for when they have sensitive information and they want as much protection as I can get them. The other is for when confidentiality is more of an issue for the other side.

The reason to have the agreements ready to go is that when a deal is at the stage that it’s now appropriate to sign a confidentiality agreement, you want to quickly volunteer your agreement before they volunteer theirs.

There is usually an advantage to being the one who provides the document. I’ve often said, “He who drafts sets the agenda,” which is to say that no matter how much you and I negotiate their form, you’ll never do as well as when their negotiating my form. It’s just the way it is in the world of sophisticated business negotiations.

Limiting the Subject Matter

If you’re not as concerned with your information as the other side is with theirs, you’ll want to be as specific as possible about what exactly the confidential information is. You’ll want to avoid catchall language and their ability to designate previously disclosed information as confidential after the fact.

Of course, you should flip the advice if you’re providing them important company secrets. You’ll still want the specifics, but be sure to get yourself some broader language.

How Long?

There are two issues under the heading of “How long.” One is that you may want to limit the period of disclosure so that you can have an intense period with lots of information exchange, but that’s it. Anything disclosed outside this defined period, let’s say the next 30 days, isn’t covered by the agreement. Of course, if you’re mostly providing the secrets, you’ll want as long a period as you can get.

The second issue is how long the confidentiality obligation should last. If the information will be public anyway in six months, you don’t need a three-year agreement. You get the idea.

Whatever confidentiality deal you strike, just be aware there is no standard agreement or terms. You’re free to strike the deal that best balances your risks with the benefits of the confidentiality agreement. Just don’t sign whatever it is they put in front of you because it’s their “standard form.”

Mobile licensing deals raise many complex legal and business issues that need to be thoroughly negotiated and documented in the agreement.  These deals have their own customs, usages, and norms.  This seminar provides insight into the real language use in mobile licensing deals, industry norms and concessions one should expect. The discussion will include warranties, limitations of liability, performance standards, acceptance testing procedures and change orders, to name a few.

Topics will include:
•     Four key provisions you will need in every mobile licensing deal agreement.
•     How a limitation of liability clause can emasculate your agreement.
•     Tips for negotiating minimum commitments and early termination provisions.
•     How to handle personally identifiable information and other confidentiality issues.
•     How intellectual property provisions in agreements can be a trap for the unwary.
•     Three negotiating techniques guaranteed to work every time.
•     Four ways to keep mobile licensing contracts out of court.

WHEN:           Tuesday, May 22, 2012
8:30am – 10:00am

HOST:             Mark Grossman, Counsel, Technology Law

WHERE:        Tannenbaum Helpern Syracuse & Hirschtritt LLP
900 Third Avenue, New York, NY 10022

RSVP:             Nancy Wu at wu@thsh.com

Image via Wikipedia

I’ve yet to see a vendor’s first draft of an agreement that provided a customer with any protection from this ugly scenario.  Of course, when the vendor is my client, my agreement is silent on this issue too.  After all, I know from experience that few customers have the wherewithal themselves or a real tech lawyer who would ever consider this issue.

When I’m drafting for a vendor, my silence on this issue serves my purpose by not flagging the issue for the general corporate lawyer who I typically see on the other side of the table.  It’s certainly not my job to create the issue checklist for a generalist bluffing his or her way through a deal.  Thus, this issue often goes to my side due to my mere silence.

However, when I’m drafting for a buyer the answer to the problem I raise is somewhat simple.  In the first redline that you send to your vendor, please include a provision similar to this one.

“If Vendor should at any time make a successor product available for the Licensed Program that includes substantially similar functionality and features as a Licensed Program for which Customer has purchased a program license (the “New Software”), Vendor shall provide Customer with: (i) a commercially reasonable migration path from the Licensed Program to the New Software; and (ii) the right to use the New Software under the Agreement at no charge; provided, however, that (a) Customer is current on all fees for maintenance and technical support for the Licensed Program; and (b) this right shall only apply to New Software that is available in production release status on the operating system identified by Customer at the time of the request.”

When I’m representing the vendor, I say “no,” no,” and “no” again to this idea.  My talking points include “substantially similar” is too vague.  New software always comes with new features and a new price point, and customers should pay for those new features at the new price point.  While we would certainly be open to this discussion when and if there is “New Software” to discuss, this is just one big hypothetical now and should not be on the table for discussion now.

When I’m representing buyer, my talking points include new software is not a hypothetical.  It happens all the time.  My client is investing substantial money and resources to the implementation of your solution and we do not intend to make this investment without reasonable assurances that we’re not going to be held hostage to an expensive migration path caused by you renaming your next version.

When he says, “We would never do that to you.”  I agree with him, but say that I’m not worried about him or his team.  I’m worried about who replaces him or buys his company.

Round and round we go.  Don’t you just love a good negotiation?  This is actually my idea of fun.

Here is some compromise language you might consider if you’re at an impasse.

“Vendor shall only be required to provide the New Software to Customer at no charge if Vendor is currently making available, at no charge, such migration path from the Licensed Program to the New Software to any of Vendor’s other customers.  If Vendor does not provide any of Vendor’s other customers a migration path from the Licensed Program to the New Software at no additional charge, then Vendor shall provide Customer with the right to use under the Agreement at no additional charge only the functionality and features contained in the New Software that are substantially similar to the functionality and features contained in the Licensed Program; provided, however that Customer shall not have the right to use, nor shall Customer use, any additional functionality or features in the New Software.”

Just remember, you can’t get something in a negotiation without asking.  So, before you say, “My vendor will never agree to this.”  Please try.  I’ve had success with this concept when I represent the buyer.

As a side note on contract drafting, please notice that my contract language is devoid of pronouns.  While this piece is prose, contracts are not.  While my contract language is clear and in plain English, that’s not the same as saying that it’s designed to be as readable as this piece read in its entirety.

Pronouns simply have no place in contracts.  If you continue to use them (oops a pronoun), eventually some litigator litigating one of your contracts will argue that the antecedent of the pronoun was something nobody intended.  At that point, you’ll wish that your contract did not include the word “it.”  Folks, that’s the way litigation works.

Here’s a simplified example of the type of a limitation of liability provision that you’ll see in tech agreements—this one’s from a software as a service agreement. “The liability of the software as a service provider to customer for any reason and upon any cause of action related to the performance of the work under this agreement whether in tort or in contract or otherwise shall be limited to the amount paid by the customer to the software as a service provider pursuant to this agreement.”

No Tricks up My Sleeve

Now, if you sign-off on a clause like that because you figure that your lawyer will find some technicality to overcome it, I’d say don’t depend on it. As a generalization, it means what it says and says what it means.  Judges can read, and a judge would probably enforce it as written.

If you had to sue for damages that exceed what you’ve paid under the agreement, all isn’t necessarily lost. Still, it’s like fighting with both hands tied together. While it’s clearly one-sided, courts aren’t in the business of rewriting deals to make them fairer. That’s your job when you’re negotiating your deal.

It’s the Norm

When you negotiate your agreement and tell the other side that the limit of liability has to go, you’re likely to get a blank look. You know, it’s the same one you get from your kids when you remind them that they haven’t given you your change.

I know what I say when I represent the seller of tech services. I say things like, “Limits of liability are the norm.” “Everybody uses them.” “We’ve never done a deal without one.” “We would have to increase the price dramatically because of the additional risk we would be assuming.”

Ironically, all of this is true. So, we’re done, right? Wrong. A skilled and experienced negotiator can make all the difference here.

While it is the norm to see limits of liability in deals like software as a service, cloud computing, licensing, telecom and outsourcing deals, it’s not necessarily true that they’re all as onerous as my example. While getting the other side to remove it completely may be like climbing Everest, making it fairer isn’t necessarily so hard if you ask for the right things.

The Negotiation

If they won’t eliminate the limit of liability provision, which no well-represented tech, telecom, or outsourcing company would, you have to start pecking at it to chink their armor. So let’s go back to my example where the software as a service provider’s liability is “limited to the amount paid by the customer to the software as a service provider pursuant to this agreement” and look at some ways to start pecking at it.

Let’s say you have a five-million dollar deal cooking, which calls for five equal payments over five months as work progresses. Let’s say that after the first month it becomes clear that the work they’re doing is causing more harm than good, so you rightly refuse to make your second one-million dollar payment. Finally, let’s say that they’ve somehow caused you damages valued at two-million dollars.

You might think that you could easily obtain a judgment for your two-million dollars.  However, you can’t because the limitation of liability provision limited your recovery to the amount you paid – i.e. a refund. Therefore, as written, no matter what they do and no matter how bad it is, the most you get is a refund of the one-million dollar you’ve paid to date. They risked nothing!

King Henry VI (Photo credit: TranceMist)

My first attempt to chink their armor would be to ask them to agree to a limit of liability of an amount equal to the total value of the contract to them (five-million dollars) and not the amount paid to date. Failing that, I might ask for some multiple of the amount paid to date.

Another approach would “reciprocity.” In fact, I’d say that no single word is more important in moving a one-sided agreement toward the middle than reciprocity. What’s good for them is good for you. Don’t be embarrassed to ask. They certainly were not embarrassed to make the provision one-sided to their advantage.

The idea is that the most that they can ever recover from you is equal to the most you can recover from them. Why should they have a protective limit, but not you? They won’t like that, but it’s hard to argue against the proposal’s inherent fairness.

Yet another approach would be to carve out an exception if they infringe the intellectual property rights of a third party. In the example as written, if they “created” software for you and you were sued for millions for infringing some third party’s copyright, you would pay millions.  Still, you could only recover one-million dollars from them as the ones who really caused the infringement. Again, it would not be fair.  Therefore, liability for indemnification arising from the infringement of intellectual property should be excluded from the limitation of liability.

Another thing you want to exclude from the limitation of liability is any third party’s property damage or bodily injury claim. As with the copyright situation, it seems inherently unfair that you should pay unlimited amounts of money to a third party because of something your software as a service provider did.

A few other items that I want excluded from a limitation of liability include willful or intentional torts, claims arising from their breach of a confidentiality provision, a claim arising from their improper use of personal identifiable information, any claim for indemnification other than for IP which we discussed above, claims arising from their failure to comply with the law, and their intentional breach of contract.

It’s almost a waste of time to put effort into negotiating a contract to have it emasculated by a one-sided limitation of liability clause. Don’t let that happen to you. While it may be true that these types of clauses are “normal,” don’t assume that the one in their proposed agreement has dropped from the heavens as the only way it can be.

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This week’s blog is a reprint of an article I wrote that appeared in the Winter 2011 edition of “Inside,” a journal published by the Corporate Counsel Section of the New York State Bar Association.

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It is time for companies to take their blinders off.  Social networking is not going away.  You can choose to embrace it now or wait until your company is the last one in.  Either way, your company will use social networking at some point.  Why wait?

Image by Getty Images via @daylife

If your answer is that there is legal risk, I would submit that this is a poor answer.  Most activities carry legal risk and our job as lawyers is to help our clients manage those risks.  Moreover, the risks that come from social networking are manageable.  This article will help you accomplish this.

The “risk” issue reminds me of when Internet email was hitting corporate desktops in the 1990’s.  Companies engaged in what today seem like nonsensical debates about whether employees needed email.  Of course, they did.  Similarly, they worried about legal risk in the face of unknown law.  Sound familiar?

I remember writing a column in the 1990’s where I said that virtually every employee with a telephone on their desk would have email access within five years.  That is one prediction I got right.

Now I have a new prediction.  Within two years, virtually every company will be using social media like LinkedIn, Facebook, Google+, and Twitter to promote itself.  Does your company really want to be last in?

Image via Wikipedia

Reining in Risk for the Enterprise

Most commentators would acknowledge that social networking for the enterprise is not without risks.  In fact, it is like any other public forum and carries most of the same risks.  Some of the issues that your company needs to consider include copyright infringement, trademark violations, litigation related issues, advertising and employment law, and privacy.

The starting point of any legal analysis of any issue involving the Internet is that the Internet is not the Wild West.  Rather, it is a forum that is at least as regulated as any newspaper.

The problem is that like any new technology, new law trails the development of the technology.  After all, nobody regulates technology that is yet to arrive.

And “new” is where we are with social media in that the law is still developing.  Thus, as we had to do with the Internet generally in the 1990’s when “Internet Law” was still in its infancy, we must look to current law and use common sense to apply it by analogy to social networking.  (The problem is the concept of “common sense” since “law” has been described as “common sense as modified by the legislature and courts.”)

Some of the analogies are easier than others.  For example, it is certainly clear that your company cannot use material created by others in violation of general copyright law.  The Digital Millennium Copyright Act (“DMCA”) is yet another Federal statute that is relevant to social networking.  The DMCA could require that your company promptly take down material from a social networking site it controls whether an employee or third party posted the infringing content[1].

Likewise, your company’s social networking posts must be sensitive to trademark law.  If your trademark analysis says that your company could not use “Coke’s®” logo in a company brochure, you could not use it on your company’s blog.  This is the common sense part.

Another easy one is in the area of litigation.  There can be no doubt that if your company has a litigation hold is in place for whatever reason, this hold would also apply to all social media.  Thus, your company may not erase a blog post that is relevant to litigation although common sense says that it would be wise to remove public access to a problematic post.

Another area of concern is advertising law.  It is certainly “common sense” to assume that the Federal Trade Commission act, which bans unfair and deceptive trade practice[2] and the CAN-SPAM Act[3], which regulates “spam” are relevant to the world of social media.

Using copyright and trademark concerns, litigation holds, and advertising and employment law as mere examples, you can begin to see the importance of training your employees.  It goes without saying that they are the actors for your company and that their lack of training and sensitivity to these issues is your nightmare waiting to happen.

You must dispel the myths about the “Wild West.”  In an online environment where the entire world might see a social networking post, you certainly do not want employees posting things like, “Our only competitor is a thief” because lo and behold defamation law applies to social networking activities.  (That is unless you really want to go down the truth is an absolute defense to libel path.  I will go out on a limb here and guess that you do not.)

Employees’ Personal Social Networking

A whole other area of concern for your company is how your employees use social networking outside the office.  After all, they have personal accounts on Facebook, LinkedIn, Twitter, Google+ and others.  They may not understand that what they say on their personal Facebook account could haunt their employer and them.

If your company does not already have a social media policy in place, you are late at getting there.  However, you can begin rectifying that today and you should.  A great example of a personal blog policy is one Yahoo developed.[4]

Among the most important concepts in the Yahoo policy is that any employees who identify themselves as Yahoo employees “should notify their manager of the existence of their blog just to avoid any surprises.”[5]  Knowledge is power and your company can mitigate the risk employees create online by merely knowing the post is there.  You should encourage this notice.

While many companies may want their employees promoting their business in their personal LinkedIn and Facebook accounts, it is important to sensitize employees to the fact that when they speak on behalf of their employers on a personal social networking page, they are putting their employer at legal risk just as if they were posting on the employer’s “official” LinkedIn page.  This may not be obvious to the average employee who may think that different rules apply on a personal social networking page.  It is the same theme yet again.  It is all about training.

Monitoring Employees’ Online Activities

Many companies have started to monitor their potential and current employees’ online activities.  The fact is that people will post “remarkable” stuff online for all to see.  Many companies will look at that “remarkable” stuff and choose to pass on a potential hire or consider terminating an employee over online posts.

It can be hard to feel sorry for someone who “friends” his boss on Facebook and posts, “My boss is an incompetent fool.”  (“Oops.  I forgot he was among my friends.”)  Still, it is important for your company to have a written policy in place that clearly states that the company does and will continue to monitor social networking activities for posts the company reasonably deems inappropriate.  Further, this policy should make it clear that termination is among the possible consequences for inappropriate activities.

A bit of caution is in order when monitoring personal activities online because some states including New York have laws that prohibit an employer from punishing an employee due to legal leisure time conduct[6].  Nonetheless, many think that it is a best practice to monitor employees’ online activities while being aware of the parameters for action set by statutes or otherwise.

Embrace but Understand

If your company has not yet jumped headfirst into using social networking to its advantage, it is time to do it.  This should be about as obvious as the need for a corporate website should have been in 1996.

While it is true that the law can be murky with social networks, with some education, training and supervision, you could and should minimize those risks.  Do not permit yourself to be a nay-saying lawyer fearful of new technologies.  If that is you, hire an outsider to assist.  Do whatever it takes.  Just do it.

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• TechLaw-Using a Chat Program for a Back Channel during Telephone Negotiations (ecomputerlaw.com)

The trends are clear.  When negotiating deals, we’re all increasingly using online tools like WebEx and GoToMeeting, and conference bridges in lieu of face-to-face meetings.  When doing deals using these tools, it is essential that you have a back channel for real time communication with your team.  I am huge advocate of using an instant message or chat program for this back channel.

Image via Wikipedia

It’s amazing how fast these online meeting tools have changed the way we do deals.  The cost savings of using a WebEx or GoToMeeting can be compelling.  Still, you lose a lot when you’re not face-to-face even if you are using web video conferencing.  The information gained when you’re in the room across the table from someone is invaluable.  Moreover, I think that people find it harder to take hard contrarian positions in-person.  Still, in a world of tight travel budgets, it is increasingly common to forego these and the many other advantages of in-person meetings.

One of the things you can do to improve this remote, one channel environment is to open a back channel for communicating with your own side in real time.  The starting point is to agree on a compatible instant message program.  It could be an encrypted corporate type solution that will make your IT folks happiest (but this type of solution will have some costs), or a no cost solution like AOL’s Instant Messenger (aim.com).

The goals of using this back channel are several.  One is to avoid stepping on each other.  Being able to type messages like “drive home that point,” “let’s change our direction,” or “let me talk” in the background can help keep your team acting like a team and not simply a bunch of uncoordinated one-on-one players.  Another goal is minimizing the need for breaks while your team reconvenes on a private conference bridge to coordinate its efforts, positions, and impression.

You might find it useful to have several chat windows open at once.  One could be a window that your entire team can see and type in, and another might be for the two or three leads only so that they can have their own private chats.

Image via Wikipedia

I’m not sure why, but some of my clients resist setting up this back channel.  I cringe every time I have no way to type something like, “You are making a big mistake with that position.  Stop!  Let’s talk on my other line before you continue down this direction.”  Without that back channel, I’m forced to call a break in a way that draws attention to the disagreement within our team.  That’s not the type of information you want the other side to have.  If they’re smart, they just may be able to exploit that type of internal division.

It’s essential that the other side in a negotiation see your team as a monolith with a single position.  Having to discuss internal positions on a single open phone line with the other side is poor technique.  My recommendation is that you create a back channel and use it to keep internal communications private.

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After almost 30-years of practicing law, I’m still amazed at the number of

Image via Wikipedia

legal fallacies that even sophisticated business people have about doing deals and properly documenting them. A prominent fallacy is that Letters of Intent (LOI) are always nonbinding or just not important for some reason that I cannot fathom.

I suppose that the misconception arises because — well — it does say “Letter of Intent” and not “Contract” at the top of the page.

Do yourself a favor. Press the “I Believe” button on this one when I tell you that LOIs can be binding agreements — you need to take them seriously, and they need to be written by your attorney.   When you think that you have an exciting deal to close, please take a deep breath and make sure that you get the documentation right.

LOIs go by many names, such as Memorandum of Understanding, Agreement in Principle, and Term Sheet, among other things. Whatever you call them, they can bite you if you’re not properly circumspect about the things you sign.

Yes, it’s exciting when you have a big cloud computing or software as a service (SaaS) deal to sign for your enterprise.  I know that when they mention the LOI, it’s a Right Guard moment. Just understand that once you sign that LOI, you may be blurring the line between engagement and marriage.

If you never close your deal because you never could work out all the details, you may find that LOI under lots of scrutiny. LOIs can and do end up in courtrooms. The essence of the lawsuit is often plain ol’ “breach of contract.”

It really comes down to this. Nonlawyers are often under the misconception that the title of the document absolutely governs the situation.

If the language in your LOI reads like a binding contract, it’s probably a binding contract. Don’t make the mistake of thinking that just because not every detail of your deal is in the LOI that this necessarily means you would win if sued.

The starting point in drafting an LOI is to remember its purpose. Usually, parties are looking to summarize their deal as a prelude to negotiating the details. It’s usually intended to be superseded by a more formal and lengthy document.

Using a SaaS deal as an example, the LOI might talk about the basic service that the vendor will provide.  It might even talk about some of the customizations that they will do for you.  Usually, the parties don’t intend for these terms to be binding if they never sign a more formal contract that includes all the details.

However, the parties usually have terms they do expect to be binding even if they never close the deal. Some examples would include a confidentiality provision and a provision that says each party is responsible for their own attorneys’ fees and other expenses in connection with the negotiation of the deal.

If your LOI isn’t specific about whether it’s really a contract or a nonbinding summary of the state of your negotiations, you could be creating an unpredictable mess for yourself. If there’s ever a dispute about the LOI, you’re forcing a court to look at the document as a whole, accept testimony with those who participated in the LOI creation process, and then make an educated guess as to the intent of the parties.

In this situation, the fact that it says, “Letter of Intent” at the top is just a single piece of evidence that a court will use to find the parties’ intent. If everything below the title reads like a binding agreement, the court may find that you have a contract and not just the simple outline of terms to be negotiated that you thought you had.

In some ways, if your lawyer does it right, this can be simple. A well-drawn LOI has a provision that specifically states to what extent the parties intend it to be a binding agreement. A typical provision will say that the LOI in fact has provisions that the parties intend to be binding even if they never sign another document. It will then go on to specify those provisions.

Whatever you do, just remember that an LOI is a legal document, which you should have your lawyer write. If you think that you are up to the task, let me give you some perspective: As somebody who mentors young lawyers, I’ve yet to find one who fell out of law school with an innate ability to draft legal documents. It takes years of mentoring and training for a young lawyer to master the art of legal writing. I just ask, “Who mentored you?”

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