Letter Of Intent Sample In New Zealand: What To Include And Legal Risks

If you're buying a business, selling a business, raising capital, or negotiating a major commercial deal, you'll often get to a point where both sides want to "capture the deal" before spending serious time (and money) on due diligence and legal documents.

That's where a Letter of Intent (LOI) usually comes in.

But here's the tricky part: an LOI can be a helpful roadmap, or it can accidentally lock you into obligations you didn't expect. If you've searched for a letter of intent sample, you're probably looking for something you can adapt quickly. That's totally understandable - but you'll want to know what should be in it, what should not be in it, and which parts might become legally binding even if you label the document "non-binding".

Below, we'll walk you through what an LOI is, when to use it, what to include, key legal risks under New Zealand law, and a practical letter of intent sample you can use as a starting point.

What Is A Letter Of Intent (And When Should Your Business Use One)?

A Letter of Intent is a document used during negotiations to record the main commercial terms you and the other party are working towards.

In practice, an LOI is commonly used for:

• Business sales (asset sale or share sale) where the parties want to agree a price and process before drafting the final agreement
• Commercial leases where key deal points are agreed before the full lease is prepared
• Supply or distribution arrangements where the parties want to align on key terms before committing to a long-form contract
• Investment and capital raising where parties want to document headline terms before final transaction documents
• Joint ventures where the parties want to outline contributions, governance and next steps

Sometimes businesses call this document a "heads of terms" or a "term sheet". Another similar concept is a Heads of Agreement or even a Memorandum of Understanding. The name matters less than the wording and structure - that's what determines your legal risk.

As a small business owner, an LOI can be useful because it:

• keeps negotiations focused (so you're not renegotiating core terms later)
• reduces "deal drift" when the lawyers start drafting
• helps you decide whether it's worth paying for due diligence and documentation
• can secure practical protections during negotiations (like confidentiality or exclusivity)

The key is making sure your LOI supports your negotiations - without turning into a contract you didn't mean to sign.

What To Include In A Letter Of Intent In New Zealand

A good LOI is usually short, clear, and commercial. Think of it like the "map" for the deal: it should show where you're heading and how you'll get there, without trying to become the final agreement.

While every deal is different, most LOIs for New Zealand businesses include the following sections.

1) Parties And The Proposed Transaction

Start with the basics:

• full legal names of the parties (individuals, companies, trustees)
• NZBN / company number where relevant
• a plain-English description of the deal (e.g. buying the assets of a business, buying shares, entering a long-term supply agreement)

This is also where you clarify whether the transaction is an asset sale or a share sale - which has very different legal implications (for example, what liabilities come with the business).

2) Purchase Price (And How It's Calculated)

Be specific about the price structure, such as:

• fixed price
• price subject to stocktake / working capital adjustment
• earn-out structure (where part of the price depends on future performance)
• deposit (if any) and whether it's refundable

If the deal is a share transaction, the final paperwork is often documented in a Share Sale Agreement. For an asset transaction, it's typically captured in a Business Sale Agreement.

3) What's Included (And Excluded)

This is one of the most important parts of the LOI - and one of the easiest places for misunderstandings to happen.

For example, if you're buying a business, you'll want to be clear about whether the price includes:

• stock and how it's valued
• plant and equipment
• intellectual property (brand names, domain names, customer lists)
• assignment of leases or supplier contracts
• employee arrangements (if staff will transfer)

If you're not crystal clear here, you can end up with a "price agreement" but no shared understanding of what's actually being purchased.

4) Due Diligence And Access To Information

Most LOIs include a due diligence period and explain what the buyer can review. This might include:

• financial statements and tax information
• key contracts (customers, suppliers, leases)
• employment information and any disputes
• intellectual property ownership
• regulatory compliance (licences, consents, industry requirements)

You'll also want to clarify practicalities like: where information will be provided, what format, who can access it, and what happens if something is missing or delayed.

5) Conditions (What Must Happen Before The Deal Proceeds)

Conditions help you avoid committing before key risk checks are complete. Common conditions include:

• successful due diligence (buyer's satisfaction)
• finance approval
• landlord consent to assignment of a lease
• third-party consents (key suppliers, franchisors, regulators)
• board / shareholder approval

Tip: conditions should have clear timeframes and a clear "what if it doesn't happen" outcome (terminate, extend, renegotiate, etc.).

6) Confidentiality (Often Binding)

Even where the commercial terms are "non-binding", confidentiality is usually drafted to be legally binding - because you're likely going to exchange sensitive information during due diligence.

Some businesses include a confidentiality clause inside the LOI; others sign a separate Non-Disclosure Agreement. Either way, make sure it covers:

• what counts as confidential information
• who can access it (e.g. accountants, lawyers, financiers)
• permitted uses (only for evaluating the transaction)
• how information must be stored and returned/destroyed
• exceptions (e.g. compelled by law)

7) Exclusivity / No-Shop (Often Binding)

Exclusivity means the seller agrees not to negotiate with other potential buyers for a defined period. For buyers, it's often essential - otherwise you may spend money on due diligence only to lose the deal to someone else.

For sellers, exclusivity can be risky if the buyer drags their feet or uses exclusivity to "park" the business while they decide.

If you include exclusivity, define:

• the exclusivity period
• what the seller is restricted from doing
• what information the buyer must provide or actions they must take during the period (to stop delay)
• what happens if there's a breach (e.g. can the deal be terminated, can costs be claimed)

8) Timetable And Next Steps

An LOI should reduce uncertainty. A simple timeline helps, such as:

• LOI signed on
• due diligence completed by
• formal agreements prepared by
• signing by
• completion/settlement by

9) Costs

It's common for each party to pay their own legal/accounting costs, but it's worth stating. Sometimes parties agree that if one party pulls out without a defined reason, they reimburse some costs - but this needs careful drafting to avoid disputes.

Letter Of Intent Sample (NZ) ? A Practical Template You Can Adapt

Below is a simplified letter of intent sample suitable for many New Zealand commercial transactions. It's written in plain English, but it still follows a structure lawyers expect to see.

Important: This is a general starting point only and doesn't take into account your specific circumstances (including tax, accounting, employment and transfer-of-staff issues that often come up in business sales). Whether an LOI is binding can depend on the exact words used and how negotiations unfold. Before signing, it's smart to get legal eyes over it - a quick Contract Review can help you avoid the most common traps.

Letter Of Intent (Sample)

Date:

Parties
1) of (NZBN/Company No: [ ]) (Party A)
2) of (NZBN/Company No: [ ]) (Party B)

1. Purpose
The purpose of this letter is to record the key terms on which the Parties intend to negotiate and prepare formal transaction documents for the proposed described below.

2. Proposed Transaction
Party A intends to and Party B intends to the following:

3. Purchase Price And Payment Terms
The indicative purchase price is NZD $[ ]. Payment is proposed to be made as follows:
(a) Deposit (if any): $[ ] payable on , which is subject to .
(b) Balance payable on completion on .
(c) Adjustments (if any): .

4. What's Included / Excluded
Included in the Transaction:
? including .
Excluded from the Transaction:
?

5. Conditions
The Transaction is conditional on (at a minimum):
(a) Party A completing due diligence to Party A's satisfaction by .
(b) Party A obtaining finance approval on terms acceptable to Party A by .
(c) Any required third-party consents (including landlord consent, supplier consent) being obtained by .

6. Due Diligence Process
The Parties intend that due diligence will commence on . Party B will provide reasonable access to information requested by Party A, including financial, operational, and contractual information, subject to confidentiality obligations.

7. Confidentiality (Binding)
The Parties agree to keep confidential and not disclose any confidential information received in connection with the Transaction, except to their professional advisers or as required by law. This clause is legally binding and continues for [ ] years from the date of this letter.

8. Exclusivity (Binding / Optional)
In consideration of Party A proceeding with due diligence and document preparation, Party B agrees that from the date of this letter until , Party B will not solicit, negotiate, or enter into discussions with any third party regarding a transaction materially similar to the Transaction.

9. Timetable
The Parties propose the following timeline:
? Due diligence completed:
? Transaction documents agreed and signed:
? Completion/settlement:

10. Non-Binding Nature (Except Certain Clauses)
The Parties acknowledge that clauses 7 (Confidentiality), 8 (Exclusivity) and 11 (Governing Law) are intended to be legally binding. Subject to those clauses, this letter is not intended to create a legally binding agreement to proceed with the Transaction, and no Party is obliged to complete the Transaction unless and until formal transaction documents are negotiated, signed, and any conditions are satisfied or waived.

11. Governing Law
This letter is governed by the laws of New Zealand and the Parties submit to the non-exclusive jurisdiction of the New Zealand courts.

Signed for and on behalf of Party A:
Name: ______________________
Title: ______________________
Date: ______________________

Signed for and on behalf of Party B:
Name: ______________________
Title: ______________________
Date: ______________________

End of sample.

Key Legal Risks: When A "Non-Binding" LOI Can Still Create Problems

Using a letter of intent sample is helpful, but the real risk is assuming the label "non-binding" does all the work for you. In New Zealand, what matters is the wording, the context, and whether the document shows the parties intended to be bound (either immediately, or once certain steps occur).

Here are the main legal risks we see for small businesses.

1) Accidentally Creating A Binding Contract

If an LOI includes all (or most) essential terms and is written in a way that suggests the parties intended to be bound before signing the "long form" agreement, it may be enforceable as a contract - even if it's called an LOI. Outcomes here can be fact-specific, so it's worth being careful with drafting and with what you do after signing.

Common "red flags" include:

• language like ?the parties agree? rather than ?the parties intend?
• no clear statement that the deal is subject to formal documents
• a clear price + clear scope + clear completion date + little left to negotiate
• conduct after signing that implies the deal is already locked in (e.g. taking over operations early)

If you want clarity on how contracts form in practice, it helps to understand what makes a contract legally binding in New Zealand - the concepts often apply to LOIs too.

2) Binding "Side Clauses" You Didn't Fully Think Through

Even where the main commercial terms are non-binding, LOIs often include binding clauses such as:

• confidentiality
• exclusivity
• costs
• governing law and dispute resolution

These can have real consequences. For example, a poorly drafted exclusivity clause can stop you (as seller) from talking to other buyers for months, with no real obligation on the buyer to progress the deal.

3) Misrepresentation And Overpromising During Negotiations

It's common in early-stage negotiations to make statements like "we've got recurring revenue", "our customer contracts are locked in", or "there are no disputes".

Even if your LOI is non-binding, inaccurate statements can create legal risk. In New Zealand, misleading conduct in trade can trigger liability under the Fair Trading Act 1986.

From a practical standpoint: only include factual claims you can back up, and make sure due diligence rights are strong enough to verify what matters.

4) Unclear Conditions (Or No Termination Path)

Conditions are meant to protect you, but vague conditions can cause disputes. For example, a condition that says "subject to due diligence" without any timeframe or process can lead to arguments about whether the buyer is allowed to exit and when.

Also, if you need to change the LOI timeline or terms mid-way, doing it informally by email can create confusion. If you do vary the LOI, it's usually best to document the change clearly in writing (for example, by a short written variation signed by both parties) so everyone stays aligned.

5) Confidential Information And Privacy Compliance

During due diligence, you might share customer lists, staff information, or marketing data. That information can be commercially sensitive - and sometimes it's also personal information.

Under the Privacy Act 2020, you need to be careful about how personal information is used and disclosed. This doesn't mean you can't share anything during due diligence, but it does mean you should think through what's necessary, how it's protected, and whether you should de-identify certain information until later in the process.

6) Entity And Authority Issues (Who Is Actually Signing?)

Small businesses often operate through:

• a limited company
• a sole trader structure
• a trust (with trustees signing)

If the "wrong" party signs (for example, an individual signs when the company should sign), you can end up with personal liability or enforceability issues.

It's also worth checking whether internal governance documents restrict who can approve major deals. For companies, a Company Constitution may set out approval requirements that you need to follow before committing to key terms.

How To Use A Letter Of Intent Without Getting Burnt (Practical Tips)

Most LOIs aren't "bad" - they just need to be approached with the right mindset. Here are practical steps that help small business owners stay protected from day one.

Be Clear On What's Binding And What's Not

Don't leave it implied. Spell it out:

• which clauses are intended to be binding (usually confidentiality/exclusivity)
• that the rest is subject to formal documents being negotiated and signed
• that either party can walk away if conditions aren't met

Don't "Finalise" The Deal In The LOI

It's tempting to make the LOI very detailed to avoid later negotiation. But if it becomes too complete, it can start to look like the final agreement.

A better approach is to:

• agree the key commercial deal points
• leave the detailed legal and operational terms for the formal agreement
• make sure the LOI clearly anticipates further documentation

Watch Out For Exclusivity Timeframes

Exclusivity can be fair - but it should be proportionate. For example, if due diligence is expected to take 10 business days, a 90-day exclusivity period may not make sense unless there's a clear reason.

If you're the buyer, include obligations on the seller to provide information promptly. If you're the seller, consider including "milestones" the buyer must meet to keep exclusivity.

Get The Right Document For The Deal

Sometimes, an LOI is the right tool. Other times, a more structured document is better (for example, a term sheet, a heads of agreement, or going straight to a formal contract).

If you're moving toward a business sale, having the right transaction document early can save time and confusion later - and it's much easier to negotiate properly when the terms are in a clear legal framework like a Business Sale Agreement (asset sale) or a Share Sale Agreement (share sale).

Key Takeaways

• A Letter of Intent (LOI) helps you record the headline terms of a deal before spending time and money on due diligence and formal legal documents.
• Even if you start with a letter of intent sample, parts of your LOI (like confidentiality and exclusivity) are often intended to be legally binding and should be drafted carefully.
• Key sections to include are the transaction description, purchase price and structure, inclusions/exclusions, due diligence, conditions, confidentiality, exclusivity, and a clear timetable.
• Major risks include accidentally creating a binding contract, unclear conditions and timelines, misrepresentation risks under the Fair Trading Act 1986, and sharing sensitive information without proper protections.
• The safest approach is to clearly state what is binding and what is not, keep the LOI focused on key commercial terms, and get legal advice before you sign.

Note: This article is general information only and isn't legal (or financial/tax) advice. If you're planning a transaction, it's worth getting advice tailored to your circumstances.

If you'd like help drafting or reviewing a Letter of Intent (or turning agreed terms into a formal contract), you can reach us at 0800 002 184 or team@sprintlaw.co.nz for a free, no-obligations chat.