Letters of
Intent ("LOI") , also known as Memoranda of Understanding and Memoranda of
Agreement, are a device used to signal parties' agreement to the basic structure
of serious negotiations to close a deal. An LOI typically comes into play after
a round of initial discussions and after the signing of a Confidentiality
Agreement and a second round of more serious discussions about the proposed
transaction.
Letters of intent are interim documents used in the course of negotiating terms
for a transaction that serve a combination of functions. One, they signify a
commitment to the transaction by setting out generally agreed to terms of the
transaction. This allows the parties to negotiate major issues without being
distracted by issues that are not likely to be “deal-killers.” Two, they
typically include a timeline and method for resolving open issues.
Because a letter of intent will likely include both binding and nonbinding
terms, it is important for the parties to understand the rights and obligations
that may be created by a letter of intent. Below is a sample letter of intent.
CHECK OUT SAMPLE LETTER OF INTENT
