Letter of Intent



A letter of intent is a document that clarifies key details of a future deal.

Uses

  • Clarifying the terms of a future or potential offer
  • A letter of intent is a document that clarifies key details of a future deal.

Overview

When you make an offer to purchase or sell goods or services for value, you have started the process of creating a legal contract. If your offer is accepted, a legal contract is formed committing you to supply the goods and services for the agreed price.

Parties to a negotiation may want to put certain terms of a deal in writing, but they aren’t quite ready to make a formal offer. In these cases, the parties can formalize the terms of a potential offer by using a letter of intent.

A letter of intent can resemble a contract, but the letter is typically much more concise. Rather than a lengthy articulation of terms and conditions, a letter of intent is written in less formal language, often using bullet points and tables. A letter of intent itself is not a legal contract, but it does create an outline for a deal. Parties are not bound to the terms in the letter of intent, but they have represented their interests and absent a change in circumstances seldom change their minds.

A letter of intent does not bind the parties to its terms, but instead it is meant to show someone's interest making a future deal or to clarify the terms of ongoing negotiations. A letter of intent can also be helpful in securing financing for a personal or business venture, as the letter provides some degree of assurance of some future deal.

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