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Free Letter of Intent Template

A letter of intent (LOI) is a versatile document that declares that one party is committed to doing business with another party if an agreement can be reached. It should include the most crucial terms of the prospective deal in letter format. Think of an LOI as outlining the broad strokes of a potential deal before the parties get to the nuts and bolts of determining the finer points.

Letters of intent are frequently used in academic pursuits, such as applying to graduate school or job searches when you hope to get your foot in the door, even without a specific job opening. They are also frequently used in mergers, acquisitions, and real estate deals. LOIs establish the groundwork for future negotiations in a wide array of business deals.

What is Included in a Letter of Intent

A letter of intent typically includes the terms of the agreement, any stipulations and requirements made, timelines, and the names of the involved parties. Typically, a letter of intent will be structured similarly to a formal business letter. The best structure would include the following:

  • The contact information of the sender
  • The date
  • The recipient’s contact information
  • A salutation
  • An introduction that introduces yourself or your business and includes the purpose of the LOI
  • A brief background that introduces the letter’s context and references previous discussions or agreements.
  • The body of the letter of intent should provide detailed information relevant to the specifics of the proposed action. Include the terms and conditions agreed upon by both parties, as well as the timeline for completing the deal.
  • Reference any attachments to the letter of intent
  • Create a conclusion that summarizes the key points
  • A closing that thanks the recipient for their consideration and expresses willingness or expectation of discussing the matter in further detail.
  • A formal closing and signature

A letter of intent often includes a non-disclosure agreement.

The Purposes of a Letter of Intent

As we’ve briefly referenced, a letter of intent has numerous purposes in business, education, and employment. Some examples of the uses of an LOI include:

  • Employment negotiations
  • Mergers and acquisitions
  • Joint venture proposal
  • Real estate deals that will require significant negotiations
  • Educational pursuits, such as collegiate athletes agreeing to play for a particular college if both parties can come to an agreement about scholarships

A letter of intent should clarify the points of a deal that have been agreed to and those that still need to be negotiated. It can also set an expiration date on how long the parties agree to commit to negotiations. For example, an LOI may include language that states that “ABC Corporation agrees to proceed with the sale of XYZ property as long as the parties can reach a mutual agreement of terms by _______(insert specific date).”

How to Make a Letter of Intent Effective

A professionally crafted template allows you to draft an effective LOI that includes the necessary language and information. Further, the letter of intent should clarify your objectives by defining exactly what you hope to achieve. Clearly state your key points, such as what you bring to the table and what you want from the recipient. Then, move on to the proposed terms, ensuring that they’re clearly stated in an easy-to-understand manner.

Prepare and include supporting materials to support the LOI, such as a business plan, project plan, or portfolio. The supporting documents needed will depend on the exact purpose of the letter of intent.

Consider the following suggestions to make a letter of intent as effective as possible.

Clarity

Misunderstandings happen frequently, even when things are in writing. Clearly state the purpose and relevant details, including the purpose of the LOI, to avoid misunderstandings.

Keep it Concise and Specific

Avoid including unnecessary details and ambiguous language. Instead, provide clear language that outlines all involved parties’ terms, conditions, and expectations.

Professionalism

Use formal language, even if you have a personal relationship with the other party. Conveying the information in a professional tone will help support the validity of the letter. The LOI should clearly be labeled as such to avoid having it confused with other, perhaps less formal, communication.

Avoid Contractual Language

A letter of intent is not intended to be legally binding. Instead, it is meant to indicate a “meeting of the minds” before reaching the contract stage. However, if contractual clauses or language are used, it can lead to enforceable contractual obligations.

To avoid an unintended contract, avoid:

  • Phrases like “shall,” “must,” or other mandatory phrases that can be interpreted as contractual statements. You should also avoid terminology such as “in good faith,” which some courts have determined can be contractual in nature when coupled with other phrases.
  • Performance mandates in the LOI, such as a non-refundable escrow account, can result in the LOI being considered a contract.
  • Language in subsequent correspondence that refers to the LOI as a “contract” or “final agreement” may be used as evidence of a contractual obligation.
  • Be particularly careful in real estate dealings and ascribe to the school of thought that “less is better.” Courts have upheld letters of intent as purchase agreements when they contain a purchase price, property description, terms of payment, and closing dates.

If you’re concerned about inadvertently creating a contract, consider consulting with an attorney to review your letter of intent. Visit EasyLegalDocs for free legal document templates that are free and easy to use.

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Letter of Intent Template

Below you can see a sample of the Letter of Intent template:

Template Letter of Intent

Letter of Intent FAQs

What is a letter of intent?

A letter of intent (LOI) is a versatile document that declares that one party is committed to doing business with another party if an agreement can be reached. Letters of intent are frequently used in academic pursuits, such as applying to graduate school or job searches when you hope to get your foot in the door, even without a specific job opening.

What should be avoided in a letter of intent?

Be careful to avoid contractual obligations in a letter of intent. You should also avoid unrealistic deadlines. It can take time for parties to perform due diligence and come to an agreement, so by setting unrealistic deadlines, you’ve rendered the LOI ineffective, as it’s likely to take longer than you’ve allowed to complete the deal.

What is the purpose of a letter of intent?

The purpose of a letter of intent is to declare the intent of all parties to do a specific thing. A letter of intent establishes the starting terms for negotiations and how the deal will be structured. It provides details that all parties can refer back to throughout the remainder of the negotiation process.

Is a letter of intent the same as a memorandum of understanding?

It depends on the type of language used. A letter of intent serves as an outline of the terms and conditions agreed to by all parties and specifies the intent of the party or parties that sent the letter of intent. A memorandum of understanding provides a broad outline of the agreement that the parties have reached. The only distinguishable difference between the two is that a letter of intent is not intended to be binding, while a memorandum of understanding is considered binding.

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