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A Letter of Intent to Do Business is a formal document that expresses your intention to enter into a business relationship with another party in New Zealand. While typically non-binding, this document serves as an important foundation for negotiations and helps establish mutual understanding between potential business partners.

When do you need this document?

You need this document when exploring significant business opportunities that require formal expression of intent before committing to binding agreements. Common scenarios include merger and acquisition discussions where you want to demonstrate serious interest while conducting due diligence, joint venture negotiations that require outlining preliminary terms and responsibilities, strategic partnerships where you need to establish framework conditions, and distribution or manufacturing agreements where parties must align expectations before detailed contract drafting. The document is also valuable when seeking investment or funding, as it shows potential investors your commitment to structured business relationships.

Key legal considerations

Your Letter of Intent should clearly specify which provisions are binding versus non-binding to avoid unintended legal obligations. Confidentiality clauses are typically binding and enforceable, protecting sensitive information shared during negotiations. Include specific termination provisions that allow either party to withdraw without penalty, and establish clear timelines for moving to binding agreements. Consider exclusivity periods that prevent parties from negotiating similar deals with competitors during the LOI term. Ensure the document includes appropriate disclaimers about the preliminary nature of discussions and that no binding obligations exist except for specified provisions like confidentiality and good faith negotiation requirements.

Legal requirements in New Zealand

Under the Contract and Commercial Law Act 2017, your Letter of Intent must clearly indicate its non-binding nature to avoid creating unintended contractual obligations. The Fair Trading Act 1986 requires that all statements of intention are accurate and not misleading or deceptive, making truthful representation of your business intentions crucial. If your proposed business relationship could affect competition, ensure compliance with the Commerce Act 1986 to avoid anti-competitive provisions. For electronic execution, the Electronic Transactions Act 2002 governs validity of digital signatures and documents. Include appropriate Privacy Act 2020 compliance measures when sharing personal information during negotiations, and ensure any binding provisions like confidentiality meet standard contractual formation requirements under New Zealand law.