Facts: Eileen Norkunas owned a home in Baltimore, Maryland. The Groves and the Cochrans expressed an interest in buying the house. The two couples drafted a handwritten letter, stating:

Letter of Intent

We, Rebecca Cochran, Robert Cochran, Hope Grove and Robert Grove, Buyers-offer to buy 835 McHenry Street, Baltimore, Md. 21230 for $162,000. Payment by $5,000 check, this date and $157,000 by certified or cashiers funds no later than April 17, 2004. 

A standard form Maryland Realtors contract will be delivered to Seller within 48 hours. Seller to pay only ½ normal transfer taxes and a 3% commission to Long & Foster. All other costs of closing to be paid by buyers.

The contract will contain a financing requirement for buyers, but buyers will guarantee closing and not invoke the financing contingency. We will delete the standard home inspection contingency.

The buyers and their broker signed the Letter. Norkunas accepted the buyers’ check for $5,000 but never deposited it. A few days later, the agent sent Norkunas a package of documents including a “Residential Contract for Sale.” Norkunas signed the contract but never returned it to the buyers. A week later, Norkunas informed the buyers that she would not sell the property and took the property off the market.

The buyers sued claiming the letter of intent entitled then to the house. The trial court gave summary judgment for the buyers, but an intermediary appellate court reversed holding that the letter of intent was not binding. The buyers appealed.

Questions:

1. Did the letter of intent create a binding agreement?

2. The parties agreed to a letter of intent with the purchase price, payment terms, and contingency clauses. Why wasn’t that enough to create a binding agreement?

3. Why did they go to the trouble of writing and signing a letter of intent if it had no legal effect?

4. You say the letter of intent is often important for business people. Do lawyers like to use them, too?

5. How do lawyers deal with those concerns?