Letter of Intent (LOI) Template

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A letter of intent is a variation of a formal letter that expresses an individual’s intentions to perform a specific task or buy something. Therefore, it will often outline preliminary terms for an agreement and can even have a requirement to follow through with a formal contract within a set time frame. Customize this letter of intent template on Lawrina and download a concise and neat PDF document in minutes.
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Paper titled "Letter of Intent"; man standing with a suitcase and talking to a woman holding a folder; desk with an armchair

A letter of intent (LOI) is written as a party's or individual's intention to commit to a transaction or any legally binding act. Therefore, it will often outline preliminary terms for an agreement and can even have a requirement to follow through with a formal contract within a set time frame.

Since the LOI pertains to future transactions or actions, it is not legally binding. It is possible for the LOI to fall through if certain provisions are not met. This letter of intent template will include everything that you need to know about an LOI, why you should use it, and what you should include in yours.

What Is a Letter of Intent?

A letter of intent is a variation of a formal letter that expresses an individual’s intentions to perform a specific task or buy something. In business dealings, such a letter of intent can be useful in declaring a company’s position on an agreement or terms that both parties have settled on while negotiations may still continue.

A letter of intent sample allows you to show interest in a business and engage with it in a professional manner. You can state your interest without having to enter into a formal business arrangement. It is considered a show of good faith, as both parties are able to set their future plans without having to involve lawyers.  

Parties of the Letter of Intent

A letter of intent is less of a contract and more of a record-keeping requirement in most business settings. Parties will often use an LOI to mark different stages of the negotiation leading up to the final agreement.

The parties who are likely to use LOI in the business world are companies engaged in a merger. Since mergers can take time with negotiations, it also acts as a safeguard if the deal collapses during negotiations.

Other parties who could use a letter of intent are employees and employers. More specifically, an employee can send a LOI to show that they are interested in working for the company. However, unlike most other job proposals, this individual is not looking for a specific role in the company.

Finally, one of the most common parties to use an LOI is property owners. A letter of intent can also help express your interest in purchasing or renting out a property owner's home.

Key Terms

  • Deadlines or transaction milestones: Either party will often include a clause that encourages the other to complete negotiations by a specific deadline.

  • Due diligence process: These are the steps that both parties will often take to investigate the other for the veracity of their claims and if they can follow through on their promises.

  • Cash, stock, or credit for use in consideration: If both parties are likely to exchange assets in the future, they need to mention what those assets are. 

  • Purchase terms and price: The terms that both parties will agree to when finalizing the agreement, and it’s price. 

  • Exclusivity: Both parties can add a legally binding clause restricting the other from sharing the details of the LOI.

  • Financing contingency or other conditions to close: The financing contingency will allow the buying party the ability to drop negotiations without fear of retaliation. For loans, buyers will also be able to get their money back. 

  • Liabilities and assets included: The selling party will have to include the assets that they are willing to give and what liabilities the buyer will be taking on. This is common practice in acquisitions and mergers.

Is a Letter of Intent Legally Binding?

Two core factors determine if a letter of intent is legally binding: if it expresses one party's intent and if it contains all of the material terms of an agreement. For instance, during the A.J Richard & Sons, Inc. V Forest City Ratner Cos., LLC case, the judge deemed the LOI as legally binding since all future negotiations only concerned the finer details of their agreement.

Types of Letter of Intent

You can use a letter of intent throughout various professional and business situations. Below, you can find some common types of LOI that fit more specific circumstances.

Purchasing a Business, Real Estate, or General Property

A letter of intent comes in handy to show that you are interested in buying a business, a commercial property, or even a residential property. However, you should explicitly state that this is not an official purchase agreement. The terms and conditions will be a part of the official purchase agreement, which relevant parties will sign off on.

Scholarship Acceptance

It is also possible for you to send a letter of intent to a university for their scholarship program. The LOI should express excitement and appreciation for the opportunity.  It does not have to be very long, but it should be professional when addressing the right people.

Joining a School

If you plan to join a specific university or graduate school, you might have to send a letter of intent to that university. In fact, it is an essential part of the application process for many schools. The LOI should let the recipient know that you have submitted your application and list the graduate program you are applying for. 

Acquisition

An acquisition LOI is often similar to one you would send for buying a business, with the main difference being that the former should be confidential. Since it can include basic terms of agreement and price, you have to be careful that the letter of intent does not go past them. 

Employment

A letter of intent can be an effective way to inform a company that you are interested in working at a specific position or in a department. There might not be any openings for the job you are applying for, but if there are, then they are more likely to consider you.

Letter of Intent vs. Cover Letter

Many people often get confused between a letter of intent and a cover letter. The differences can be even harder to notice when considering job hunting.

Letter of Intent

An LOI focuses mainly on the company rather than any specific job openings that it has. 

Cover Letter

A cover letter is not only sent when applying for a specific job; it also discusses the candidate's skills relevant to that position.

What Should a Letter of Intent Include?

A letter of intent can differ depending on who you are sending it to. You can follow a letter of intent template, as some information remains similar regardless of who or what institution you are sending it to. Include a professional greeting that can be directed towards a specific individual in a company, but that is not necessary. You can move on with such points:

  • Add a short introduction about yourself

  • Mention why you are writing this letter

  • Include your skills and experiences that make you well-suited for the job

  • Add a call to action to close off your LOI

Why Should You Create a Letter of Intent?

Following through on a letter of intent template is essential since it allows you to capitalize on opportunities you would have otherwise missed. Lenders sometimes require proof of a deal before providing any financing. Furthermore, this can also be useful to see if the party you are dealing with is committed to the agreement. Since the specifics of the deal can be negotiated later, it can also bookmark important milestones leading up to the final signing.

How To Write a Letter of Intent

A letter of intent can be useful in various academic, professional, and business situations. And since it is versatile, writing one for your specific needs is never too complicated. This letter of intent template is a good place to start writing your own, as most of the rules stay similar.

1. Determine the Name of the Recipient

Adding your recipient's name to the letter of intent is often good practice, except for instances where the letter addresses different people. But, sending the letter of intent to a specific person can increase the likelihood that the right people will even get your letter.

2. Choose the Best Greeting

The next step is choosing a greeting, but you rarely need to deviate from the original “Mr./Ms Last Name." It is simple, succinct, and professional, and you no longer have to think about how to address them.

3. Write the Body

This part can change drastically depending on why you are writing your LOI. In fact, a good letter of intent template will leave this section blank since you need to fill it in yourself. If you are purchasing a business, mention your interest in the business and your asking price. But if you want to start working for a company, you can mention what makes you suitable to work there. You need to address the company or person and state your interest and reason for writing.

4. Include a Professional Closing

Make sure you use more formal closing statements like “Yours Truly” and “Sincerely,” with your name directly underneath.

When To Use a Letter of Intent

Common Use Cases

You may need a letter of intent to send to a property owner when you want to start a conversation about buying, renting, or leasing a property. Also, you can use the document when working together with a business or even buying it — when entering into a partnership with a company or acquiring a business.

Lastly, a letter of intent can also help students to land a position in a specific educational institution. For example, you may craft a letter of intent to express your interest in a particular university and highlight your qualifications and goals.

When Not to Use a Letter of Intent

Avoid using a letter of intent when one party is already seeking to finalize the terms of the agreement. For instance, if two companies are in advanced negotiations and are near to reaching an agreement, using a letter of intent at that stage might not be needed and could make the process more complicated.

Additionally, it is important to be cautious because the LOI does not have legally binding terms. For example, suppose one party provides confidential information to the other party during the negotiation phase based on the LOI. In that case, there may not be legal protections in place to prevent the recipient from misusing or disclosing that information. These non-binding terms can potentially make either party responsible for something without any legal obligation.

Frequently Asked Questions

How long should a letter of intent be?

A letter of intent is not supposed to be too long and actively benefits from being short and succinct. Make sure that the letter you are writing is not longer than 800 words or can even be as long as 400 words. Just make sure that you can get across the purpose of the letter and why they should read it.

How do I end a letter of intent if negotiations fail?

Save for a few instances, a letter of intent is not legally binding. Therefore, if negotiations fail or if the terms are not met, the LOI will simply cease to be effective. However, if you are too deep into negotiations and then they fall through, either party will be held liable. Since both partners have followed through on many future plans mentioned in the letter of intent, a judge will see it as a legally binding contract.

What is the difference between a letter of intent, a memorandum of understanding, and a term sheet?

A letter of intent, a memorandum of understanding, and a term sheet are often confused with each other. The main difference between the three really comes down to their formatting.
 

A letter of intent is an actual letter that is often addressed to an individual or a company.
 

A term sheet is a simple document that lists the terms of a deal and explains why you are referring to it. It has a clear and direct tone and can be seen as a letter of intent in court.
 

A memorandum of association is like a letter of intent, but it is written before the final agreement. It is the last step before making a formal contract, and it does not involve any money exchange.