Frequently asked questions
Does the letter of intent have to be in written format?
The law does not prescribe a mandatory format requirement for the letter of intent, however, it is advisable to conclude the letter of intent in writing or in electronic format with digital signature in order to ensure that all circumstances and conditions are clearly established. This will help to prevent and solve potential disputes.
Is the letter of intent binding to the parties?
The letter of intent specifies the intentions of the parties but shall not oblige the parties to enter into the transaction or any other agreement. The parties acknowledge and agree in the letter of intent that the letter of intent does not create any financial or legal obligation whatsoever between the parties, except the obligation of confidentiality that will be binding for the parties.
What is confidential information?
Confidential information is not legally defined, but there are some conditions which confidential information has to meet. First of all, information identified as confidential has to actually be confidential, meaning it should not be public knowledge. In addition to that the disclosing party has to have a reason (including legal reason) to identify information as confidential. In order to avoid confusion, it is advised to describe confidential information as precisely as possible. It has to be taken into consideration that an agreement in which all of the information exchanged between the parties is declared confidential, might be too confining for the receiving party.
What if the receiving party breaches the confidentiality obligation?
The parties can agree, that if the receiving party breaches the confidentiality obligation, the disclosing party has the right to demand contractual penalty. Additionally the disclosing party has always the right to demand compensation for damages for the part which is not compensated by the penalty.