Letter of Intent Template

What is a Letter of Intent?

A letter of intent records what two parties have agreed in principle before the full contract is drafted: the deal, the price, the timetable, and what happens next. It matters because deals negotiated verbally drift. Six weeks on, the two sides remember different numbers and there is nothing to compare them against. The LOI is the fixed point — and, written carelessly, it can also be a binding contract that nobody meant to sign.

Letters of intent appear in business acquisitions, commercial property lettings, construction, distribution and supply arrangements, joint ventures, and institutional or research collaborations. A buyer sends one to a seller to move into exclusivity and due diligence. A tenant sends heads of terms to a landlord's agent. A main contractor issues one to a subcontractor so work can begin while the contract is finalised. The names differ — heads of terms, term sheet, memorandum of understanding — and the document does broadly the same job in each case.

Whether an LOI binds is decided by the governing law and by what the document actually says, not by the title at the top. English law looks at whether the parties intended to create legal relations and gives weight to the words subject to contract. US courts examine the wording and the parties' conduct, and some states will enforce an obligation to negotiate in good faith. Civil law systems across the EU can impose pre-contractual duties. India applies contract law principles to the substance. Have the wording reviewed by a qualified adviser before signing, particularly the parts you intend to bind.

An LOI does not close the deal, transfer anything, or replace due diligence. It does not commit funds unless it says so, and it does not stop either side walking away unless there is an exclusivity clause with real teeth. What it does least reliably is stay non-binding: exclusivity, confidentiality, costs and governing law clauses are usually meant to bind even when the commercial terms are not, and a document that fails to separate the two is where the argument starts.

What to put in a Letter of Intent

These are the details this template asks for. Anything left blank is marked in red on the preview so you can see what is still missing.

How to write a Letter of Intent

1. Say which parts bind and which do not

   This is the whole document. Put a clear statement near the top that the commercial terms are subject to contract and not binding, then list the clauses that are binding — confidentiality, exclusivity, costs, governing law, dispute resolution. Do not leave it to inference. A court reading an LOI without that separation will decide the question for you, using the wording and the parties' behaviour.

2. Set out the commercial terms in numbers

   Price or rent, payment structure, what is included and excluded, the term, the key dates, the conditions to be met. Use figures and dates rather than ranges and adjectives. If a number is genuinely open — a purchase price subject to completion accounts — say what it depends on and how it will be calculated. The point of an LOI is that both sides can check their notes against one page.

3. State the conditions the deal depends on

   List what has to happen before signature: satisfactory due diligence, board or shareholder approval, finance, regulatory clearance, landlord consent, a clean survey. Say who is responsible for each and by when. A condition nobody owns is a condition nobody chases, and this list is what turns the LOI into a working timetable rather than a statement of good intentions.

4. Fix exclusivity and confidentiality carefully

   If there is an exclusivity period, give its length and end date, say what the other side may not do during it, and say what happens when it lapses. Add a confidentiality obligation covering the existence of the discussions, not only the documents exchanged. These clauses are usually binding, so write them as though they will be enforced, because they are the parts most likely to be.

5. Give the deal a timetable and longstop

   State the target date for a signed contract, the intended completion date, and who prepares the first draft. Add a longstop date after which the LOI falls away if nothing has been signed. Then have the whole document reviewed by a qualified adviser before signing — an LOI is short, so the review is quick, and its cost is trivial next to an unintended binding obligation.

Common mistakes

• Leaving out any statement about binding effect, so whether the document is a contract gets decided later by somebody else on the basis of whatever wording you happened to use.
• Writing the commercial terms as ranges and intentions, which reproduces exactly the ambiguity the letter was written to remove.
• Agreeing exclusivity with no end date, locking one party out of the market indefinitely and creating the clause most likely to be argued about.
• Starting work or spending money on the strength of an LOI that expressly commits no funds, leaving the cost unrecoverable if the deal does not proceed.
• Signing without a longstop date, so a stalled deal keeps its exclusivity and confidentiality obligations alive long after both sides have moved on.

Frequently asked questions

This page explains general practice and is not legal advice. Requirements differ between countries and, in some cases, between states — check what applies where the document will be used.

Related templates

All templates · Legal templates