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Due diligence can be a legal obligation, but the term more commonly applies to voluntary investigations. It may also offer a defence against legal action. A common example of due diligence is the process through which a potential acquirer evaluates a target company or its assets in advance of a merger or acquisition. [1]
A letter of intent (LOI or LoI, or Letter of Intent) is a document outlining the understanding between two or more parties which they intend to formalize in a legally binding agreement. The concept is similar to a heads of agreement , term sheet or memorandum of understanding .
Vetting is also a term used in the field of transitional justice.When countries undergo a transition process—after a period of armed conflict or authoritarian rule—they must determine what to do with public employees who perpetrated human rights abuses.
An Estoppel Certificate (or Estoppel Letter) is a document commonly used in due diligence in real estate and mortgage activities. It is based on estoppel, the legal principle that prevents or estops someone from claiming a change in the agreement later on. [1] It is used in a variety of countries for commercial and residential transactions.
Comfort letters are often used because the seller is unable or unwilling to provide a guarantee on a certain outcome, such as the performance of a security. [3] Comfort letters are typically signed prior to the pricing decision or closing date for a given public offering or other transaction, as a part of the due diligence process. Subsequently ...
A business proposal is a written offer from a seller to a prospective sponsor. Business proposals are often a key step in a complex sales process, where a buyer considers more than price in a purchase.
The letter of intent generally does not bind the parties to commit to a transaction, but may bind the parties to confidentiality and exclusivity obligations so that the transaction can be considered through a due diligence process involving lawyers, accountants, tax advisors, and other professionals, as well as business people from both sides. [13]
Due diligence is the amount of diligence required to avoid negligence in professional activities. It commonly arises in major acquisitions where the legal principle of caveat emptor ("let the buyer beware") requires the purchaser to make diligent inquiries about the property or service being sold.