When LOIs Create Commercial Litigation Risk

Posted March 09, 2026 in Uncategorized

Most commercial real estate disputes don’t originate at closing. They originate at the letter of intent stage, weeks or months before a purchase agreement is drafted.

The LOI is often treated as a handshake in writing, a placeholder that signals intent while the real deal gets negotiated. That framing is a mistake. What the LOI says, and what it leaves out, shapes litigation risk, negotiating position, and deal economics well before anyone picks up a pen to sign a final contract.

Volpe Law LLC works with developers, investors, and medical practice groups on exactly these situations, where deal exposure is highest before formal contracts exist.

Binding vs. Non-Binding Language

An LOI typically states that most of its terms are non-binding. But that word “typically” is doing a lot of work.

Courts in Colorado and across most jurisdictions have found that certain LOI provisions are enforceable even when the document says otherwise. Confidentiality clauses, exclusivity periods, and good-faith negotiation obligations frequently fall into this category. If a party walks away from a deal after exclusivity runs, or discloses proprietary information to a competitor during due diligence, those provisions can create real exposure.

The structural question isn’t whether your LOI is binding. It’s which provisions are binding, under what conditions, and what remedy exists if they’re breached.

Confidentiality and Exclusivity Provisions

Exclusivity periods are among the most common dispute triggers in commercial real estate transactions.

A seller agrees to take the property off the market for 60 days while the buyer conducts due diligence. The buyer uses that window to run down financing, entitlements, or internal approvals. When the exclusivity period expires or the deal falls apart, questions about what was promised, disclosed, or withheld tend to surface quickly.

Common issues that appear at this stage:

• Exclusivity periods with no clear end date or renewal mechanism
• Confidentiality language broad enough to restrict how a buyer uses deal information post-termination
• Vague good-faith negotiation clauses that create implied obligations neither party intended
• No defined process for extending timelines without triggering default

In professional service environments, particularly medical and dental practices where acquisition value is tied directly to provider contracts, patient volume, and regulatory standing, a blown exclusivity period can mean a lost deal and an exposed competitive position.

Due Diligence Timelines and Financing Contingencies

LOIs that set unrealistic due diligence timelines create downstream pressure on every subsequent negotiation. A 30-day window in a build-to-suit transaction for a surgery center carries very different implications than a 30-day window for a standard retail acquisition. The complexity of the asset should drive the timeline, not a placeholder number inserted to advance the deal.

Financing contingencies are a related issue. When financing conditions are vague, “subject to satisfactory financing,” the buyer has wide latitude. When they’re specific, the seller has protection. The strategic question is who bears the risk if capital markets shift during the contingency period, and whether the LOI reflects that allocation.

A Denver business dispute lawyer who has worked through failed commercial transactions will tell you that financing contingency disputes rarely come down to the facts. They come down to how the contingency was drafted.

Deposit Structure and Early Termination Rights

Hard versus soft deposits are a direct negotiating point that most buyers undervalue at the LOI stage.

A soft deposit is refundable if the deal terminates for a defined reason. A hard deposit is not. The transition between soft and hard, often triggered by the expiration of the due diligence period, is where disputes concentrate. If the buyer claims a due diligence condition wasn’t satisfied and the seller disagrees, the deposit becomes the central litigation issue.

Early termination rights need to be explicit. LOIs that leave termination conditions ambiguous give neither party clean optionality and both parties a reason to litigate.

Evaluating When Litigation Makes Sense

For disputes arising from a failed LOI, the litigation analysis depends on several factors:

• What damages are actually provable, including reliance costs and wasted due diligence spend
• Whether exclusivity or confidentiality provisions were clearly enforceable
• The deposit amount at issue
• Whether specific performance is a realistic remedy

For medical practice groups negotiating clinic acquisitions or build-to-suit arrangements for specialty facilities, the operational disruption of a failed deal compounds the financial loss. That context matters when evaluating whether to pursue litigation or negotiate an exit.

LOIs deserve serious attention before a dispute arises. If you’re reviewing a term sheet or dealing with a transaction that went sideways, a Denver business dispute lawyer at Volpe Law can walk through your position with you. Contact our team to discuss the specifics.