Great point. This is what happens in a real estate. A letter of intent should have earnest money deposited into an escrow (because the offer is being made in "earnest") and each contingency should have an expiration date. Upon expiration of the due diligence contingency, for example, the earnest money deposit becomes non-refundable and credited towards the purchase price. If the buyer defaults after the due diligence contingency then the earnest money goes to the seller.

Does anyone have a link to a sample LOI for selling startups or M&A in general?