The Letter of Intent for Services is commonly used in Hong Kong's business environment when parties wish to formalize their preliminary understanding regarding a service arrangement while maintaining flexibility for detailed negotiations. It serves as a stepping stone toward a definitive agreement, typically used in situations where parties need to demonstrate commitment, secure initial approvals, or establish exclusivity for negotiations. The document, while primarily non-binding except for specific provisions like confidentiality, provides a clear framework for the proposed service relationship and helps avoid misunderstandings during negotiations. In Hong Kong's legal framework, which follows common law principles, such letters of intent can have significant legal implications if drafted with binding elements, making it crucial to clearly specify which provisions are intended to be legally binding.
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1. Date and Parties: Opening paragraph identifying the date and full legal names and addresses of all parties involved
2. Background/Introduction: Brief context explaining the purpose of the LOI and the proposed service arrangement
3. Definitions: Key terms used throughout the letter that require specific definition
4. Scope of Services: High-level description of the services to be provided
5. Proposed Commercial Terms: Outline of key commercial terms including proposed fees, payment terms, and duration
6. Timeline: Proposed timeline for negotiation of definitive agreement and/or commencement of services
7. Binding Terms: Clear statement of which provisions are intended to be legally binding
8. Exclusivity: Statement regarding any exclusivity period for negotiations
9. Confidentiality: Provisions regarding confidentiality of discussions and shared information
10. Governing Law: Specification that Hong Kong law governs the LOI
11. Signature Block: Space for authorized representatives to sign and date the letter
1. Good Faith Deposit: Include when a deposit or initial payment is required to demonstrate commitment
2. Due Diligence: Include when specific due diligence requirements or process needs to be outlined
3. Conditions Precedent: Include when certain conditions must be met before proceeding with formal agreement
4. Break Fee: Include when parties agree to compensation if one party withdraws from negotiations
5. Costs: Include when there's a need to specify how costs of negotiation and documentation will be borne
6. Non-Solicitation: Include when parties wish to prevent hiring of each other's employees during negotiations
7. Termination: Include when specific termination rights during the negotiation period need to be outlined
1. Schedule 1 - Initial Scope of Services: Detailed description of proposed services if too lengthy for main body
2. Schedule 2 - Proposed Fee Structure: Detailed breakdown of proposed fees and payment terms if complex
3. Schedule 3 - Timeline and Key Milestones: Detailed project timeline and key dates if applicable
4. Appendix A - Required Documentation: List of documents required for due diligence or formal agreement
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