Definition

Noun: A letter of intent is a formal document that expresses a party's serious intention to enter into a contract or undertake a specific action in the future. It outlines the preliminary understanding between parties before a final, binding agreement is prepared and signed. While it often indicates a commitment to negotiate in good faith, it is typically not legally binding for the core transaction itself, unless specific binding provisions are included.

Usage

A letter of intent is commonly used in business, academic, and employment contexts to establish the key terms of a potential deal or arrangement. It serves to clarify intentions and provide a framework for subsequent detailed negotiations and due diligence.

Examples

• The university sent a letter of intent to the top-ranked applicant, indicating their plan to offer her a professorship pending final budget approval.
• Before merging the two companies, their lawyers drafted a non-binding letter of intent outlining the proposed financial structure.
• His letter of intent to purchase the property was accepted, allowing him to begin the inspection process.

Advanced Usage

• Binding vs. Non-Binding: A letter of intent may contain a mix of binding and non-binding clauses. Provisions related to confidentiality, exclusivity (a "no-shop" clause), and governing law are often legally binding, while the terms of the main transaction (like price) are usually subject to final agreement.
• Conditionality: The intentions expressed are almost always conditional, based on factors like satisfactory due diligence, securing financing, or obtaining regulatory approval.

Variants and Related Words

• LOI: A common acronym for "letter of intent."
• Memorandum of Understanding (MOU): A similar document that records a mutual understanding between parties, often used in diplomatic or inter-organizational contexts. It can be more detailed and formal than a simple letter of intent.
• Heads of Agreement: A document summarizing the main points of a proposed agreement, similar in function to a letter of intent.

Synonyms

• Statement of intent
• Preliminary agreement
• Proposal letter

Related Phrases

• To sign a letter of intent: The act of formally agreeing to the outlined intentions.
  • The athlete signed a letter of intent to play for the state college.
• To issue a letter of intent: The act of formally presenting the document.
  • The foundation issued a letter of intent to grant the funding.

Noun

1. any letter expressing an intention to take (or forgo) some action