Using the letter of intent or letter of intent in cases of sales of crude oil: obsessed with so many traps and pitfalls Why credible legal buyers of crude oil does not want to use
Today, you hear a lot of oil dealers and traders, in particular, their brokers and agents involved in international sales of crude oil on the open market, a description, a document - called the "Letter of Intent" or LOI, in short - is not only an essential document Makes the business of crude oil but is a credible person or a company engaged in purchases of crude oil should always use a catalyst to buy. Many of these players, not just crude oil buyers should use the LOI to start their purchase orders, but the beginning of a purchase order in this way, they say, has always been the usual way, with credible buyers to start projects of contract, this is the way to show, say that the buyer is a "serious" and sincerely committed to making a purchase.
Sellers justification to require law
This position is expressed by a representative of the seller, the Swedish-based agent, this author recently changed the Office for the seller offers a buyer's mandate against the applicant, that the buyer must first sign a letter of intent , more or less sums up the reasons offered by traditional suppliers and / or their representatives, LOI:
"Buyers who are serious, ready and able to buy the [oil] to sign [a] letter of intent and all documents necessary to protect the rights of brokers and move on. There is nothing to lose by signing these documents. That's usually how it is, and that's how it should be. "
In summary, the reasoning behind obligation of the seller's intention, mainly summarized as follows:
1) To provide a letter of intent for a seller to a buyer, is a sign that the buyer is "severe" and ready to buy;
2) that the use of the letter of intent is the most common way to get started with the purchase of a proposal to the buyer, and is the right and the right way to go, and
3) That there is nothing for anyone to lose in the transaction by signing a potential buyer of a letter of intent.
What is the validity or not these usually the reasoning of the seller or their agents?
Ironically, while the oil sellers and their agents often require that candidates "serious" buyers are engaged in petroleum operations should first give a letter of intent, the buyers, on the other hand, does are generally not in love with the idea. Especially when in reality what is asked of them from the start to give the letter of intent for a little known on the Internet generated sales of which lack any knowledge or whose bona fides as sellers, they know almost nothing - except perhaps, that they (the buyers) have had some initial contact with the "seller" by contact on the Internet. Indeed, in the knowledge of this writer would gross buyers, especially the most established and prominent, rarely provide a letter of intent prior to all sellers to initiate a purchase.
And especially the so-called "sell" in question is one that is a virtual unknown to the buyer, or someone who is just an Internet provider which generated about the good faith and securities buyer knows almost nothing you can almost be almost completely sure that the chances of a serious buyer agent has signed a letter of intent for such a supplier is almost close to zero.
Unlike suppliers "and super-conscious sales agents well known statement that" There is nothing to lose by signing these documents, "quite the opposite is true - that many, in fact, it may be Lost in particular by the buyer to sign a letter of intent for a supposed seller. Why? In short, it is because the letter of intent is actually filled with numerous legal errors confusion, traps and pitfalls, many of which can often be prohibitive for the buyer, according to the legal authorities and legal experts of contracts. (See below for more details)
In fact, some experts have called for the document LOI, which is the main proponent of the use or contribute to only a marginal and amateur traders, or "joker broker" types of crude oil trading companies, in particular, eager sellers' agents and brokers desperate hurry to March, some buyers. Mr. Ziad K. Abdelnour, president and CEO of Blackhawk Partners, Inc., New York-based consulting firm traders and suppliers of metals, minerals and oil, raw materials, the LOI calls to document something that is essentially "off the Internet is used by inexperienced operators "and" inexperienced "as an intermediary seller, who claims to be a journalist. "
The point is that the notion often heard and calls for some sellers or their overzealous agents and brokers who use the intention to launch a proposal to purchase a buyer "is the way it is usually done, and that's how it should be "conservative and may be applicable only in the mind, imagination and the hopes and dreams of these providers, especially the most marginalized them and their brokers and agents operating on the periphery of numerous articles on the Internet. This is not a view shared by the broad spectrum of credible buyers, especially when "sellers" are involved operators largely unknown and obscure.
REASONS FOR BUYERS AND EXPERTS AND SHUN disapprove of the law on the use
They are as follows:
1. LOI for the manipulation of an instrument in the hands of unscrupulous sellers and agents.
Often individuals, obscure or fraud of mind Vendors who claim to be first, or be represented as sellers agents, brokers or money orders in large part on an internet contact or communication, using the letter of intent as a simple tool for quickly "box in the corner and" a potential buyer in a purchase contract before the buyer can not require them to give their business profile, or to show something concrete to show they really are legitimate vendors. These sellers persistent demand that potential buyers busy and issue them a right upfront LAW supposedly as proof that they are "serious" to purchase - that is, before the buyer can probably start to raise questions deepening about them or their credentials as legitimate sellers.
Many times, especially in a case of a seller who is supposed to be a seller of oil is actually supposed to be false or not yet in hand, or an agent of an unscrupulous salesman aspiring or broker who is not gross earned a supplier (seller), however, buyers can send a letter of intent, only to discover that there is no vendor on the other side. This often happens in situations where you have an agent or facilitator of hunger, which is still struggling to get a real vendor, and the extraction of the letter of intent to an unsuspecting buyer, the facilitator can make the only buyer for then begin to struggle to find a vendor or supplier.
2. LOI is a document legally Needless This means that virtually no
In practice, in legal terms, the LOI is a document worthless and meaningless. The LOI is a document serious shortcomings. This is because the document is, as an experienced expert in contract law, he said, "an agreement of understanding that is voluntary and not enforceable in a contract."
Ziad K. Abdelnour, chairman and CEO of Blackhawk Partners, Inc., the company based in New York Counsel on these issues, puts it: "Provide a letter of intent just means" Yes, I have the intention of buying the goods, but I can change my mind at any time. "A letter of intent is not a binding contract. [Therefore] The letter of intent is a complete waste of time on a piece of worthless paper."
So, if a letter or document, which is nominally the author or should go under "intent" or the intention to buy, is completely useless and worthless to the law, and is not binding on the signing or someone, and not to push it, so why would a buyer respectable crude oil, first of all, do not want to waste his precious time and resources (lawyers or expensive) to participate in sterile as to take advantage of the seller? In particular, unknown to the seller or vague?
3. LOI is filled with many legal traps and pitfalls, especially for the buyer.
But probably the overwhelming because a credible buyers crude oil would have little or no use to buy LOI negotiations, is that using the LOI is full of many unexpected legal traps and pitfalls that many atimes could be very expensive, and at the expense of the buyer The judicial authorities and experts in contract law.
A fundamental flaw of the LI is what J. Vasilios Kalogredis, a Wayne, Pennsylvania's attorney, calls. "Uncertainty and potential risk of this company" Kalogredisis, an expert in the contract of business law, explains:
"The letters of intent are often presented as" not binding "way to bring the parties to explain in writing what the company is one of them in connection with a transaction. Too often, the parties sign a document, feel that have little or nothing to lose by the way ....[ is] one of the attractions of the letter of intent [the alleged lack of] binding. However, courts have found letters of intent to create binding obligations, but the very letter does not say explicitly that it is binding .... certain provisions in the document made it [still] have a legal effect. "
Kalogredis requires that the basic document which is usually considered by many to be a relaxed and non-binding document, atimes could still required in certain unforeseen circumstances, "one of the traps of a letter of intent," and adds:
"My advice [to the parties that plan to have a letter of intent] is to proceed with caution before signing the document. In general (although there are exceptions), I urge the parties to go directly to the final documents and" all points I and cross all the T "rather than through the intermediate stage of a letter of intent, which has many potential dangers."
Another contract law lawyer, Ivan Hoffman of California
"The parties sometimes deliberately create a letter of intent that the word of what they are going to agree, under certain circumstances should arise .... [whatever happens], the document is not binding and therefore not applicable until the situation occurs. Thus, a letter of intent is essentially a document legally useless. It 'clear to me in September, the party would never have bothered to create a document, but I saw it used on several occasions. If the parties intend to bind to each other, then they should create a binding contract, not a letter of intent. If the parties do not intend to bind to each other, so why bother to create the document, which is not binding?
But sometimes, one party must prepare a document to believe that this is a valid contract only to find, after an expensive litigation that it was not a binding agreement at all, but simply a non- -binding, non-binding agreement to accept the intent. "
4. PAF as a source or a promoter of unnecessary litigation
In addition to the legal problem of the ambiguity and uncertainty inherent in the letter of intent, there is still a major problem in the paper, from a legal point of view. In particular, because the intention is fundamentally ambiguous nature and not final, the document that is often readily lend themselves to different interpretations and understandings in the hands of different parties (or even the courts), and are therefore to become a source fruitful unnecessary litigation and legal assistance for those who are associated with the use of this document in their transactions.
Coollawyer.com lawyers, the lawyers explain the "paradox" in nature, the LOI, the signing of the letter of intent, is often exposed to, can not be achieved unless the dispute, but more cases, and put it this way:
"Letter of Intent, legally, are the worst of all worlds. Write a letter of intent should not be taken lightly. The law, or if you have a contract or not. Letters of intent are the legal equivalent of" almost pregnant. "Letter of Intent with that force. They say there are formal agreements, and often proceed to set the terms agreed to the proposed transaction. Given this paradox, if the case goes wrong, some may say [the court] agreed that the points were, in fact, agreed -.. or, indeed, a binding contract and, in some cases, moreover, that the party was based on the letter of intent and monetary damages arising from the reliability of such "
The lawyers said: "It's the legal problem with a letter of intent - you can not legally state you commit to anything, and you are not in the same document."
Famous case of a letter of intent Gone Bad: Court case against Pennzoil Getty
A famous example often cited by lawyers, was a case involving Pennzoil and Getty Oil early in the 1984th The parties signed a "memorandum of understanding" - as seen by the parties at the time as a letter of intention - a complex investment transactions and actions whereby Pennzoil would purchase Getty Oil stock, and set the general terms of the investment that had been reached in talks and also determined that the memorandum was submitted to the approval by the Board of Getty Oil. Board of Getty Oil already approved the transaction, both parties announced January 4, 1984 a press release that a "tentative agreement" under the Memorandum. The final provisions of the merger of Texaco and Getty Oil were signed by the parties on January 6 to 8.
However, at the same time, January 6, another oil company, Texaco, entered the picture, because it is publicly announced that Texaco and Getty Oil to fit. They protested against the proposed merger, Pennzoil and Getty Oil filed a complaint with the court issue a declaratory ruling which is not bound by an agreement which was Pennzoil.
The long and short of the story is that the court after consideration not only the protocol but also formulations of press releases and other documents that Pennzoil and Getty Oil was issued as part of their relationship was of Getty Oil be "contrary" Memorandum of Understanding - the document that the parties had considered a letter of intent. Thus, a document (letter of intent) that the parties had begun considering non binding and enforceable, it changed to be that to be a final agreement! Pennzoil, on the other hand, finished with $ 10.6 billion (later adjusted to 3 billion euros) from Texaco for interfering in its agreement with Getty Oil.
Moral of the story? If you ever plan to use a letter of intent in a business transaction, you'd better look like it can not be so simple a question as you might think. You better be careful because it can lead to unforeseen and unforeseeable consequences!
SUMMARY
In simple terms, such as documents of legal cases, or even, it is difficult to imagine that any document could be so obsessed with both near-devastating legal error, traps and pitfalls for the signer, as the letter of intent. Therefore, it is not surprising that in the real world of international purchase and sale of crude oil, while the sellers and their army first occupied sales brokers and agents in general can be aggressive in love with the idea of having the document Letter of Intent widely and commonly used by buyers of oil to begin their commercial offer, nothing on the other hand, could be more bread, more unacceptable or undesirable for buyers most wines, especially the mass the most credible and tangible.
Moreover, over the rest of the negative nature of this crucial document, the intent is a document that is considered by almost all the legal experts in the field as a document which is legally meaningless, useless, unenforceable and without commitment for both parties signatory or anyone, but it still has the potential to generate enormous and unexpected legal complications and problems for the signer (s).
Finally, there is probably no more likely to enter the room, to quote this statement very appropriate for a contract law attorney, Ivan Hoffman, California
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