A famous example often cited by legal scholars, was a case involving the Getty Oil and Pennzoil in very early 1984. The parties had signed a "Memorandum of Agreement" _ viewed by the parties at the time as a Letter of Intent _ for a complex investment and stock transaction, whereby Pennzoil would purchase Getty Oil stock, and set forth general terms of the investment that had been reached in conversations, and also stipulated that the Memorandum was subject to the approval of the Board of Getty Oil. The Board of Getty Oil sooner approved the transaction and both parties announced on January 4, 1984 in a press release, an "agreement in principle" to the terms of the Memorandum. The final agreements for the merging of Texaco and Getty Oil were signed by the parties on January 6 _ 8.
"Letters of Intent, legally, are the worst of all worlds. Writing a letter of intent is not to be taken lightly. In law, you either have a contract or you don't. LOI's are the legal equivalent of "almost pregnant." Letters of Intent emphatically state that. They state that they are not formal agreements, and then often proceed to set forth agreed terms of the proposed transaction. Given this paradox, if the deal goes sour, one party can argue [in court] that those agreed_upon points were, in fact, agreed upon _ or, in fact, a binding contract. And, in some cases, furthermore, that the party relied on the LOI and has monetary damages based on such reliance."