Letters of Intent in Spain

Letters of Intent are not contracts and that is why we always advise signing a legally enforceable agreement beforehand. 

Although a Letter of Intent is not binding, most of the time there might be specific terms within the document that is legally enforceable, such as:

• Non-solicitation: Prevents both parties from poaching each other’s employees.
• Confidentiality: Ensures that there are legally enforceable obligations towards privacy.
• Exclusivity: Stops both parties from negotiating with other entities for a reasonable period and provides both parties with an incentive to complete their negotiations.

One of the advantages of signing a Letter of Intent before a Notary Public is that there is no need to prove that the document exists. Also, it shows that both parties freely agreed to be bound by its terms.

This is important because while a Letter of Intent isn’t legally binding, there may be penalty clauses in the document that need to be enforced. These can include penalties for withdrawing from the transaction without just cause.

As the Letter of Intent is not expressly regulated under Spanish law, there may be liabilities depending on the clauses inserted in the document. For example:

• Non-contractual liability – This occurs if one of the parties simply decides to break off negotiations without just cause for the end of the agreed exclusivity period.
• Contractual liability – This type of liability arises if parties to a confidential period and one of them breaches it.