letter of intent ( LOI or LoI , and sometimes capitalized as Letter of Intent in legal writing, but only when refers to the particular document under consideration) is a document that outlines one or more agreements between two or more parties before the agreement is finalized. The concept is similar to the head of agreement, term sheet or memorandum of understanding. The outlined agreement may be an agreement of merger and acquisition transactions, joint venture agreements, real property lease agreements and some other category agreements that can govern material transactions.
- LOI is similar to a short and written contract, but usually in tabular form and is not binding on all parties as a whole. Many LOIs, however, contain binding provisions, such as those governing non-disclosure, governing law, exclusivity or agreements to negotiate in good faith. LOI can sometimes be interpreted by a court of law as binding the parties to it if it is too similar to a formal contract and does not contain a clear disclaimer.
A letter of intent may be presented by one party to another and then negotiated prior to execution (or signature). If negotiated carefully, LOI can serve to protect both parties in a transaction. For example, a business seller may incorporate what is known as a non-invitation condition, which would limit the ability of the buyer to recruit employees from the seller's business if neither party can close the transaction. On the other hand, LOI can protect the buyer of a business by expressly conditions its obligation to complete the transaction if it can not secure the financing for the transaction.
Video Letter of intent
Destination LOI
The general objectives of LOI are:
- To enable parties to sketch basic requirements quickly before removing substantial resources to negotiate a definitive agreement, complete due diligence, pursue third party approval and other matters
- To declare officially that the parties are currently negotiating, as in merger proposals or joint ventures
- To provide protection if any transaction fails during negotiation
- To verify certain issues regarding payments made to others ( for example , credit card payments)
Potential losses for using LOI may include:
- The parties may engage in protracted negotiations on only part of the terms of the agreement
- Time and focus management can be transferred
- Alternative opportunities may be missed and markets may move against the parties during negotiations
- The parties can reduce the lack of a workable agreement framework into LOI, in the hope of making progress later
- Public disclosure obligations can be triggered by mistake
- The risk of leakage, compounded by some people's desire to peek LOI around the world, or shop for others
Maps Letter of intent
Specific examples
In the academic world, letter of intent is part of the application process, also known as a statement of purpose or an application essay. In education in the United States, letters of intentions are also often achieved between high school athletes and colleges/universities, for booking athletic scholarships for athletes after graduating from high school. School administrators in secondary education often require a letter of intent before approving the establishment of a student club.
In real estate, in cases where the actual property in question is not listed in the compound list service, there may not be an easy way to let property owners and other interested parties know about their intent to buy. It is often necessary to officially start the buying process, and allow all interested parties to start another process, with a letter of intent. For example, a multimillion dollar loan for a commercial property may require a letter of intent before a financial institution will allow personnel to spend time working on the necessary loan for a sales settlement. The same can be followed at the time of purchase by any company. A tenant and a building owner may sign a letter of intent before signing a lease agreement to set rental rates and all future lease rules.
In government grant applications, letter of intent is highly recommended but not required or binding, and is not included in the next app review. The information it contains enables agency staff to estimate potential workloads and plan for review.
See also
- Convenience letter (contract law)
References
Source of the article : Wikipedia
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