Letter of Intent (LOI) Template

A letter of intent (LOI) is a formal written document expressing a party’s intention to enter into a contract or agreement. It outlines the main terms of the future agreement and shows a serious commitment to a deal.

This document is most common in business transactions and purchases. Still, individuals can also use it to affirm their interest in or communicate a goal they want to achieve for a job, academic program, research project, or another collaboration.

Table of Contents

• Letters of Intent - By Type (16)
• Is a Letter of Intent Legally Binding?
• When to Use a Letter of Intent
• What to Include in a Letter of Intent
• How to Write a Letter of Intent
• Letter of Intent Sample

Letters of Intent – By Type (16)

Below, you can find different versions of LOIs that fulfill the same purpose as a traditional LOI but for unique situations.

Is a Letter of Intent Legally Binding?

Because a letter of intent discusses a potential transaction, it’s usually nonbinding. Even though it’s not a legally binding agreement, it acts as a moral commitment between two parties promising to discuss a future arrangement in good faith.

However, certain sections of the LOI may be legally binding. If the letter contains legally binding elements, it will hold one or both parties accountable to certain terms and be enforceable by the law.

Some examples of legally binding aspects of an LOI include the following:

• Confidentiality clause: Declares that the parties must not disclose any information they share during negotiations.
• Exclusivity clause: Prevents one or both parties from discussing deals with other buyers or sellers for a certain period.
• Nonsolicitation clause: Prohibits one or both parties from unfairly using the arrangement to poach clients, customers, and employees during the negotiations.
• Governing law clause: Outlines the jurisdiction governing the contract’s interpretation and offers guidelines on handling disputes properly.
• Indemnification clause: States whether any party will need to compensate the other for any losses that arise from breaches of representations or warranties occurring during the negotiations.

When to Use a Letter of Intent

Use a letter of intent to establish a preliminary agreement, ensuring that you include nonbinding language to avoid any confusion or assumptions from the other party. Without this document, you might miss out on an opportunity because another party shows more serious intent.

Here are some specific instances when an intent letter would be useful:

1. Buying Property

A potential homebuyer may use an LOI to show their intention to purchase a specific property. The letter may contain a property description and details for a desired timeline. However, the terms can change slightly as the negotiations proceed. It may also require that a buyer obtain financing before moving forward with the formal agreement.

2. Entering a Lease

In a competitive real estate market, a tenant may use an LOI to show interest in renting a property. While a residential tenant may use this letter, it’s more common for a commercial tenant. A commercial tenant may use this document to specify what improvements they want the landlord to make to accommodate their needs before proceeding with the negotiations.

3. Buying Goods or Services

Two parties can use an LOI to settle on specific terms for buying goods or services before signing a finalized purchase agreement or service agreement.

The parties can sign this document to show each other a good faith intention to negotiate a deal. It can also help parties get on the same page as to what they expect from the purchase. A letter of intent could be used after a request for a proposal from vendors.

4. Hiring an Employee

An employer often sends an LOI to a prospective employee after a successful job interview. They use this document to communicate the terms of the employment offer. If the employee currently works for the employer, the employer may use it to negotiate the terms for a pay raise or a higher-level position.

This letter can also be useful for prospective employees, as they may write this communication to relay their intent to join a company.

5. Applying for Entry into an Academic Program

Some universities require or prefer candidates to submit an LOI when applying for admission into undergraduate or graduate programs. Use this letter to express your interest in a particular program, distinguishing you from other potential students when spots are limited.

6. Acquiring a Business

Write an LOI to set the groundwork for buying or merging with another company. For example, the document may state that one party agrees to sell their business for a specific price but doesn’t yet explain who will take on certain business liabilities.

7. Entering a Joint Venture or Partnership

Use an LOI to outline the terms of a potential partnership or joint venture. Explain desired terms like the arrangement’s duration, contributions by each party, end goals for the collaboration, and decision-making protocols.

While an LOI can help two parties complete a more definitive agreement later, they may decide not to proceed with the details in the letter if certain conditions aren’t met (like a lack of funding from one party).

What to Include in a Letter of Intent

The elements to include in your letter of intent may vary depending on your end goal. For any transactional letter, ensure that you include the following elements:

• The buyer’s and seller’s names and contact information
• The initial terms to which you’re agreeing
• The effective date
• A clause stating which parts are nonbinding and binding

A nontransactional letter of intent may require different elements, such as:

• An introduction of yourself and your goals
• A clear desire to commit to the program, school, or job if you receive acceptance
• Reasons why the organization or individual should make you an offer

How to Write a Letter of Intent

Here are the steps for writing a basic letter of intent. You may have to adjust the steps slightly depending on the reason for writing this document.

Step 1 – Fill in the Initial Details

Fill out the essential information regarding the seller, buyer, and transaction.

Step 2 – Detail the Purchase Price

If the agreement is transactional, include details about the purchase price. If you and the other party decide to forgo agreeing on a purchase price until one party completes due diligence, you can note the decision here.

You can detail that a certain amount will be required upon signing the letter or, if you’re using one, upon signing a purchase agreement.

Step 3 – Record Any Conditions and Exclusivity Statements

If you and the other party subject the proposed transaction to any conditions, include them in your letter. You can also emphasize if the seller agrees not to negotiate directly or indirectly with any other party concerning the item.

The parties can include certain conditions that must occur before they sign the final agreement, such as:

• The buyer securing financing
• The buyer successfully selling their home
• An inspection of the property
• Regulatory or other required approvals

You can also clarify whether the parties should maintain confidentiality about the agreement or if they have certain covenants to complete during negotiations.

Step 4 – State the Termination Guidelines

State when the letter will terminate. For example, it could be upon executing a purchase agreement or a mutually written agreement between the parties.

Step 5 – Record the Governing Law and Write a Non-Binding Clause

Detail which state’s laws will govern the LOI and include a clause on whether the letter is binding or non-binding.

Step 6 – Obtain All Parties’ Signatures

Finish your letter by having both parties sign the document.

Letter of Intent Sample

Download a free letter of intent template as a PDF or Word file below and customize it for your specific intentions:

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DOWNLOAD MS WORD