Generate Letter of Intent
A letter of intent is a document that outlines the preliminary agreement between two parties before a formal contract is signed. It establishes the key terms and conditions of a proposed transaction.
What will this Letter of Intent be used for?
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Last Updated February 2023
What is a Letter of Intent?
A letter of intent (LOI) is a document that outlines the preliminary agreement and key terms between two or more parties before a formal, binding contract is drafted and signed. It signals that both parties are serious about moving forward with a transaction — whether that is buying or selling property, entering a lease, forming a partnership, or any other business arrangement.
A letter of intent is generally non-binding, meaning it does not legally obligate either party to complete the transaction. However, certain provisions — such as confidentiality clauses — may be legally binding.
When do I need a Letter of Intent?
Real estate transactions: Before signing a purchase agreement for residential or commercial property.
Business acquisitions: When proposing to buy or sell a business or shares in a business.
Commercial leasing: To establish the key terms of a lease before the formal lease agreement is prepared.
Business partnerships: To outline the proposed structure and terms of a partnership before a formal agreement is signed.
Frequently Asked Questions
A letter of intent is generally non-binding — it expresses intent but does not create a legal obligation to complete the transaction. However, specific clauses such as exclusivity, confidentiality, or dispute resolution provisions may be legally binding. Always have a lawyer review your LOI before signing.
A letter of intent outlines the proposed key terms and shows both parties are serious about proceeding. A contract is a formal, legally binding agreement that obligates both parties to fulfill specific obligations. An LOI typically precedes a contract.
Generally yes, since most letters of intent are non-binding. However, backing out in bad faith after the other party has incurred significant costs could result in legal liability in some jurisdictions. Review the specific terms of your LOI carefully.
A letter of intent is typically valid until the parties either enter into a formal contract or one party withdraws. It is common to include an expiration date in the LOI to ensure negotiations do not drag on indefinitely.
