Letter Of Intent (LOI) In New Zealand: What To Include (With Template)

If you’re negotiating a business deal, it’s normal to want something in writing before you spend time (and money) on due diligence, financials, and lawyer reviews.

That’s exactly where a Letter of Intent (LOI) can help. A well-drafted LOI can set expectations early, keep negotiations on track, and reduce the risk of misunderstandings - without locking you into the full contract too soon.

In this guide, we’ll walk you through what an LOI is in New Zealand, what to include, what to watch out for (especially around clauses that can become enforceable earlier than expected), and we’ll finish with a practical template you can adapt for your business.

What Is A Letter Of Intent (LOI)?

A Letter of Intent (often shortened to LOI) is a document used at the early stages of a negotiation to record:

• what the parties are discussing,
• the key commercial terms agreed so far, and
• the process and rules for getting to a final agreement.

Small businesses commonly use LOIs for deals like:

• buying or selling a business (or business assets),
• raising capital or bringing in an investor,
• entering a major supplier or distribution arrangement,
• negotiating a lease for new premises,
• forming a joint venture or strategic partnership.

LOIs are sometimes called “Heads of Agreement” or “Term Sheets”. In practice, they’re all close cousins - the label matters less than what the document actually says and whether it’s intended to be binding.

Depending on your deal type, it may be more appropriate to use a Heads Of Agreement or a Term Sheet format - but the same legal issues typically come up.

Is A Letter Of Intent Legally Binding In NZ?

This is the big question - and it’s where many business owners get caught out.

An LOI can be:

• non-binding (a record of negotiations only),
• fully binding (less common, but possible), or
• partly binding (very common - some clauses bind, others don’t).

Why LOIs Often End Up “Partly Binding”

Even if the LOI says “non-binding”, it may still include clauses that are intended to be binding - for example:

• confidentiality obligations,
• exclusivity (no-shop) periods,
• cost allocation (who pays for what),
• governing law and dispute resolution process.

In New Zealand, whether an LOI (or parts of it) is enforceable depends on the usual contract principles - including whether the parties objectively intended to create legal relations, whether the terms are sufficiently certain, and how the LOI deals with matters like being “subject to contract”. Importantly, wording like “subject to contract” is helpful, but it’s not a magic formula: if the document (or the parties’ conduct) suggests a concluded bargain on sufficiently certain terms, there can still be a binding agreement (or binding obligations) even where the parties expected a later formal contract.

Don’t Forget Misrepresentation Risk

Separate to whether the LOI itself is binding, what you say during negotiations (and what you write into an LOI) can create risk if it’s misleading or inaccurate.

If you’re selling a business, for example, careless statements about revenue, margins, key customer contracts, or “guaranteed” growth can lead to disputes later under general contract principles and consumer/commercial protections like the Fair Trading Act 1986.

That’s why it’s worth getting advice early - and why many businesses choose to have the LOI reviewed before sending it out (rather than after the other side has anchored the negotiation around it).

When Should Your Business Use An LOI (And When Should You Skip It)?

An LOI isn’t mandatory - it’s a tool. Used well, it saves time and reduces misunderstandings. Used poorly, it can create legal obligations you didn’t expect or start negotiations off on the wrong foot.

LOIs Are Usually Helpful When:

• The deal is complex (multiple assets, staged payments, conditions, restraint clauses, finance approvals, lease assignments, etc.).
• You need to justify due diligence spend (accountants, valuation, building reports, IP checks).
• You want to lock in process (timelines, exclusivity, “subject to contract”).
• There are sensitive discussions and you want clear confidentiality rules.

You Might Skip The LOI When:

• the deal is simple and you can move straight to a short-form contract,
• there’s no real negotiation (it’s a standard purchase on standard terms), or
• the parties are not aligned on key points (an LOI can create a false sense of certainty).

If your LOI relates to a business acquisition, it’s also smart to map it against the contract you’ll ultimately need - for example, a Business Sale Agreement - so you don’t agree to something early that becomes painful (or expensive) to unwind later.

What To Include In A Letter Of Intent (LOI) In New Zealand

There’s no single “right” LOI for every business. But strong LOIs tend to cover a similar set of building blocks.

Below is a practical checklist of what to include, along with why it matters.

1) Parties And The Proposed Transaction

Start with the basics:

• full legal names of all parties (including company numbers if relevant),
• who is buying/selling/partnering,
• what the transaction is (asset sale, share sale, lease, services, etc.).

If you’re buying a company (rather than assets), your final documents may involve a Share Sale Agreement - so the LOI should be clear whether it’s a share deal or an asset deal from the start.

2) Price And Payment Structure (If Known)

Even if the price is “indicative”, it helps to record what you’ve agreed so far, such as:

• purchase price (or price range),
• deposit (if any),
• payment timing (on signing vs on completion),
• adjustments (stock on hand, work-in-progress, debtors/creditors),
• earn-outs or deferred payments (if being considered).

If the price is truly not settled yet, you can say it’s subject to due diligence and negotiation, but be careful not to create a vague “agreement to agree” that still causes arguments.

3) Key Deal Terms (The “Commercial Must-Haves”)

This is where you capture the terms that matter most to your business. Depending on the deal, this might include:

• What’s included (equipment, customer lists, domain names, IP, stock, vehicles).
• What’s excluded (cash in bank, certain liabilities, certain contracts).
• Employee arrangements (whether staff will transfer, and on what basis).
• Restraints (non-compete / non-solicit expectations).
• Training/transition support (handover period, introductions to key suppliers/customers).

Tip: if you’re leasing premises as part of the deal, note early whether the transaction is conditional on a satisfactory lease being entered into, assigned, or renewed. Lease negotiations can quickly derail a deal if you leave them to the last minute - and a Commercial Lease Review can help you understand what you’re actually signing up for.

4) Conditions Precedent (What Must Happen Before The Deal Proceeds)

Most LOIs will say the transaction is subject to certain conditions, such as:

• due diligence being completed to the buyer’s satisfaction,
• finance approval,
• board approval or shareholder approval,
• landlord consent (for an assignment of lease),
• third-party consents (key supplier/customer contracts),
• signing of final legal documents.

Spell out who benefits from the condition (buyer only, both parties) and whether a party can waive it. Conditions are often the difference between a workable LOI and one that causes disputes later.

5) Due Diligence Process And Timeline

If you’re the buyer, due diligence is where you confirm you’re buying what you think you’re buying. If you’re the seller, it’s where you want the process to be structured and not drag on forever.

Consider including:

• the due diligence period (e.g. 10, 20, or 30 business days),
• what information will be provided (financials, contracts, asset registers),
• how requests will be handled (single point of contact, response time expectations),
• what happens at the end of the period (proceed, renegotiate, or walk away).

6) Exclusivity / “No-Shop” (If Applicable)

Exclusivity means the seller agrees not to negotiate with other buyers for a certain period (or the buyer agrees not to approach competing opportunities, depending on context).

Exclusivity can be useful - but it needs to be tightly drafted. If you include it, specify:

• the exclusivity period (and when it starts),
• what is prohibited (talking, negotiating, signing, sharing info),
• any carve-outs (existing discussions, inbound approaches),
• what happens if it’s breached (for example, termination rights and/or a claim for losses, depending on what you agree and what the law allows).

7) Confidentiality

If you’re sharing sensitive info (customer lists, supplier pricing, financial statements), confidentiality shouldn’t be an afterthought.

You can either:

• include a confidentiality clause in the LOI, or
• sign a separate confidentiality agreement (often cleaner).

In many situations, it’s better to use a standalone Non-Disclosure Agreement, especially if negotiations might continue even if the LOI expires.

8) Costs And Professional Fees

LOIs often clarify who pays for:

• legal fees,
• accountant fees,
• valuations,
• building inspections and reports,
• PPSR searches or other checks.

It’s common for each party to pay their own costs, but not always. The key is clarity, so there’s no argument later.

9) Status Of The LOI (Binding vs Non-Binding)

This section is critical. A practical approach is to:

• state clearly that the LOI is non-binding except for specific clauses, and
• list the clauses that are intended to be binding (e.g. confidentiality, exclusivity, costs, governing law).

If you want the LOI to be entirely non-binding, say so - but still get it checked, because sometimes the commercial terms (or the way the document is used) can create risk anyway.

10) Next Steps: The Final Contract

An LOI should point toward the “real” documents that will be signed later. That might include:

• a business sale agreement,
• a lease or deed of assignment,
• share sale or subscription documents,
• service or supply agreements,
• shareholder arrangements post-completion.

Once you move to final documents, it’s worth having them properly drafted or at least reviewed. A Contract Review can save you from signing something that doesn’t match what you thought you agreed in the LOI.

Free Letter Of Intent Template (NZ) You Can Copy

Below is a practical template you can use as a starting point. It’s written to suit common NZ small business transactions, but you should still tailor it to your specific deal (and ideally have it reviewed before you rely on it).

Important: This template is general information only. LOIs can create real legal risk if they’re unclear, inconsistent, or accidentally binding.

Letter Of Intent Template

If you want to use a shorter pre-contract document for a collaboration (rather than a purchase), a Memorandum Of Understanding structure can sometimes fit better - but you’ll still want clarity on what is (and isn’t) binding.

Common LOI Mistakes (And How To Avoid Them)

LOIs feel “informal”, which is exactly why they can be risky. Here are a few common traps we see with small business deals.

Mistake 1: Saying “Non-Binding” But Writing It Like A Final Contract

If you include every key term and the document reads like the parties have already made the deal, you can create ambiguity (or a dispute) about whether it’s binding.

Fix: Keep commercial terms “indicative” unless you genuinely want them locked in, and add a clear clause that final agreement is subject to execution of definitive documents.

Mistake 2: Exclusivity With No End Date (Or No Real Rules)

Exclusivity can be reasonable. But if it’s open-ended or unclear, it can block a seller from progressing their business and create tension fast.

Fix: Use a short exclusivity window with clear start/end dates and practical carve-outs.

Mistake 3: No Clear Due Diligence Scope Or Timeline

Due diligence can easily expand to “just one more request” for weeks. That’s stressful for everyone - and it can kill momentum.

Fix: Set a due diligence period, define how requests will be handled, and agree what happens at the end (proceed, renegotiate, or walk away).

Mistake 4: Forgetting The “Side Agreements” You’ll Still Need

Even with a good LOI, you may need separate documents to properly protect your business while negotiating (like confidentiality protections) and to properly document the final deal.

Fix: Treat the LOI as the start of the legal process, not the end - and make sure your final documents match the commercial deal you think you’ve agreed.

Key Takeaways

• A Letter of Intent (LOI) is a practical way to record key deal terms and the negotiation process before signing full contracts.
• In New Zealand, an LOI can be non-binding, binding, or (most commonly) partly binding - so you need to be very clear about which clauses are intended to be enforceable.
• Strong LOIs usually cover the parties, the transaction, indicative price/terms, conditions, due diligence process, exclusivity (if used), confidentiality, costs, and the pathway to final documents.
• A free LOI template can be a helpful starting point, but it still needs to be tailored - especially for business sales, share sales, and leases where the risk profile is higher.
• Getting the LOI reviewed early can prevent disputes later and help you move to the final agreement faster with fewer surprises.

If you’d like help drafting or reviewing a Letter of Intent (or the final agreement that follows), you can reach us at 0800 002 184 or team@sprintlaw.co.nz for a free, no-obligations chat.