Types of Letter of Intent
Whether you’re negotiating a business partnership, merger, acquisition, joint venture, real estate transaction, or employment contract, the right LOI helps set the stage for what’s next. Below, you’ll find templates for different types of LOIs, from business deals to job negotiations and more.
Show how your background and experiences align with a hiring company's values and goals. Highlight your readiness and enthusiasm for the position.
Job
Inform prospective defendants of your plan to sue and give them a chance to pay a settlement demand instead.
To Sue (With Settlement Demand)
Explain your academic history and emphasize your excitement for attending the school and pursuing your academic goals.
School
Outline the desire to buy or sell a business and include the key terms for the transaction to take place.
Business
Show that an alien fiancé and a US citizen petitioner intend to marry each other within 90 days.
To Marry (Within 90 Days)
Introduce yourself and show interest in obtaining a paid or unpaid internship with an organization or company.
Internship
Outline your interest in funding a business and include a basic outline of the proposed investment terms.
Investment (Business Proposal)
Outline a potential collaboration between a software developer and an interested client.
Software Development
Document a potential transaction, such as the provision of goods or services over a given period of time.
Other Transactions
Formalize the student-athlete's commitment to play sports at NCAA schools.
National
What Is a Letter of Intent?
A letter of intent (LOI), or a letter of interest, is a document that outlines the main terms of a potential agreement. It shows serious interest in moving forward and helps everyone stay aligned before creating a final contract. You might use a letter of intent for purchase agreements, business contracts, joint venture agreements, or licensing agreements.
While an LOI is not legally binding, it sets clear expectations and often leads to more formal agreements. It can also involve some back-and-forth to fine-tune the terms. Before signing a letter of intent, it’s a good idea to do your due diligence. That way, both sides can confirm key details and decide if they’re ready to commit.
Using a letter of intent template can help you save time, stay organized, and ensure your document includes all the key elements from the start.
Letter of Intent vs Memorandum of Understanding
A letter of intent is a formal document outlining key terms of a potential agreement, while a memorandum of understanding is a less detailed general agreement. Both are usually non-binding but can contain binding elements based on mutual agreement.
When to Use a Letter of Intent
A letter of intent is handy in situations where parties agree to negotiate before finalizing a legally binding contract. Common uses include:
1. Buying or Selling Assets
An LOI sets the stage for more formal agreements by outlining key terms and demonstrating commitment in various types of transactions:
- Real Estate: Summarizes terms for a potential property purchase
- Business Sale: Defines initial terms before finalizing the sale of a business
- Stock Purchase: Lays the foundation for a stock purchase agreement
- Goods/Personal Property: Prepares for a bill of sale, such as when selling a vehicle
2. Forming a Partnership
An LOI can express intent to form a partnership and outline crucial terms (e.g., capital contributions, responsibilities, profit-sharing) before drafting a formal partnership agreement.
3. Negotiating a Lease
Before entering into a lease agreement, landlords and tenants can use an LOI to:
- Clarify basic lease terms (rent, duration, responsibilities)
- Reduce misunderstandings
- Speed up the negotiation and signing process
Is a Letter of Intent Legally Binding?
A letter of intent is typically not legally binding, as it outlines a potential transaction and serves as a moral commitment for further negotiations. However, if it includes legally binding sections, those fundamental terms become enforceable and hold the parties involved accountable.
An LOI can have the following legally binding elements:
- Confidentiality clause: Requires the parties to keep shared information private during negotiations.
- Exclusivity clause: Stops the parties from discussing deals with other buyers or sellers for a set time.
- Nonsolicitation clause: Prevents either party from using the deal to take clients, customers, or employees from the other party.
- Governing law clause: Specifies which jurisdiction will interpret the contract and how disputes should be handled.
- Indemnification clause: States whether one party must pay the other for any losses caused by breaches during negotiations.
Separate Confidentiality Agreement
If you need to share sensitive details, consider using a separate confidentiality agreement alongside your LOI.
How to Write a Letter of Intent
Writing a letter of intent involves expressing your interest and outlining the key terms of your proposal. While the following steps focus on writing an LOI for a purchase, you can easily adapt them for other situations.
1. Add the Initial Information
Include the date of the letter for context on deadlines. Add your contact information—name, address, phone number, and email—in the header for easy communication. Clearly identify the Buyer and Seller by name, as they will be referred to as “Buyer” and “Seller” throughout the letter.
2. State the Possible Purchase & Price
State the possible transaction and describe the property the buyer may purchase. Include the purchase price and indicate when payment is due—upon signing the letter, a pending purchase agreement, or the buyer’s acceptance of the property. If you need to complete due diligence before determining a price, you can indicate that it is not yet available.
3. Record Any Conditions
You may only want to proceed with the purchase if certain conditions are met. Use your letter to specify that the transaction hinges on the buyer’s ability to secure financing, the buyer’s inspection of the property, or another condition.
4. Provide Exclusivity & Confidentiality Statements
Clarify that the seller will not negotiate with other potential buyers regarding the property sale. This exclusivity clause can last for a set number of days or remain valid for the duration of the letter. Additionally, include a confidentiality clause to ensure that the parties agree to keep the letter and its contents secret.
5. State the Termination Guidelines
State when or how the agreement will terminate. You can specify that it will end upon the earliest of one of the following events:
- signing of a purchase agreement by the parties involved
- mutual written agreement by the parties
- arrival of a predetermined date
6. Add a Non-Binding Effect
Add an explicit statement that this letter is simply one to show interest. Clarify that neither party has any obligation when they sign it. State that they must only adhere to the terms of exclusivity, confidentiality, termination and governing law.
7. Include Other Provisions
Include any other provisions to make your letter stronger and more specific. For example, you can provide a general timeline of how you’d like to see the purchase go. You may state that you’ll complete due diligence within 45 days or obtain financing within that same period. These milestones and deadlines can help facilitate future negotiations.
You can also write the state to indicate which government will oversee the letter’s contents. Naming a governing law can help if disputes arise when you negotiate the terms further, as you and the other party will know which laws will interpret the LOI’s terms.
8. Sign & Proceed
Obtain the parties’ signatures to formalize their intent. If there are multiple buyers or sellers involved, ensure to collect all signatures.
Once you sign the original letter of intent, you may start negotiations for a more formal agreement. For example, suppose you signed a subcontractor letter of intent. If you and the contractor negotiate terms you agree to, you may need to sign a subcontractor agreement to make the work relationship official.
Letter of Intent Sample
If you’re wondering what a letter of intent looks like, you can view an example below. You can customize this template using our document editor and then download it in PDF or Word format.
Create Your Letter of Intent Today
Legal Templates makes it easy to create a non-binding letter of intent. You can enter our PDF editor and input the details specific to your sale, job, educational opportunity, or other scenario. All the binding clauses, including exclusivity, confidentiality, termination, and governing law, are prewritten for you.
These clauses will hold you and the other party accountable for some aspects, but the actual intent will remain just that. It will express interest rather than a genuine commitment. From there, you can refer to your completed letter during the negotiation process and hopefully reach a final agreement.
Frequently Asked Questions
What to include in a letter of intent?
A letter of intent should include the names of the parties involved, a description of the proposed deal or relationship, key terms, any conditions, timelines, and whether the letter is binding or non-binding. It sets expectations before a formal agreement.
How to format a letter of intent?
Format a letter of intent like a formal business letter. Start with the date and contact information, followed by a clear subject line, an introduction, body paragraphs outlining key terms, and a closing section with signatures if needed.
How long should a letter of intent be?
A letter of intent is typically one to two pages long. It should be concise but detailed enough to outline key terms and demonstrate serious intent without becoming a full legal contract.
How to start a letter of intent?
Begin a letter of intent with a clear statement of purpose, such as expressing interest in a transaction or partnership. Identify the parties involved and briefly summarize the intention behind the proposed agreement.
Can you decommit after signing a letter of intent?
Yes, you can usually decommit after signing a letter of intent if it is non-binding. However, if any parts are binding—like confidentiality or exclusivity—those terms must still be honored until the agreement ends or is modified.
