Letters of Intent and the Covenant of Good Faith and Fair Dealing . 4. Delaware, associated with utilizing a term sheet or letter of intent. You can save and edit the form before you buy--just create a Nolo.com account. Although this may be counterintuitive to the spirit of moving a deal forward, it is never abundantly clear what “good faith” means or how you can inadvertently breach this covenant. If an otherwise non-binding LOI does not include an express, binding covenant to bargain in good faith, no duty of good faith will be imposed. We as practitioners understand the purpose of a letter of intent (LOI) as a unique and useful instrument in conducting business transactions. As discussed in that Briefing, in SIGA, the Supreme Court (i) enforced a contractual obligation to negotiate in good faith a definitive license agreement consistent with the terms set forth in a term sheet—even though the term sheet was labeled Accordingly, it is a good idea not to include “good faith” language in a letter of intent. While the Supreme Court of Pennsylvania has not recognized a common law duty to negotiate in good faith as inherent in a letter of intent, the Superior Court has recognized that the parties by the terms of the letter of intent can create such an obligation. In Jenkins v. However, something that tends to be inserted in the vast majority of letters of intent is wording stating that the parties to the letter of intent will negotiate, in good faith, to agree a full form agreement that will govern the relationship between them. Use this legal form to summarize agreed-upon contract terms, agree to act in good faith, and avoid prematurely binding yourself to contract terms. No Duty to Negotiate in Good Faith. For example, a Letter of Intent regarding purchase of real property may be interpreted as containing a duty to negotiate in good faith, unless the Letter expressly disclaims such as agreement. If parties to an LOI wish to impose an obligation to negotiate a definitive agreement in good faith, then the LOI should include a carefully drafted covenant to this effect. 3. Do not agree to negotiate in good faith. Keep contract negotiations on the up and up by creating a letter of intent. Elmon Bella Tanielian , Michael Best & Friedrich LLP – Salt Lake City, Utah .