There is much at stake in most business deals. It often makes sense to use a letter of intent to clarify the parties’ intentions.
What is a Letter of Intent (LOI)?
A Letter of intent (LOI) is a letter between two (sometimes, even three or more) parties or companies outlining the basic terms of a prospective business transaction. Essentially, one company uses the document as a declaration of commitment to do business with another. While businesses can draft similar agreements in many formats, an LOI’s distinct feature is its letter format.
Businesses can use LOIs for both ongoing and complete transactions, including business acquisitions. However, a letter of intent is not a substitute for a contract and only outlines the terms the parties intend to formalize in a future contractual agreement.
