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What Is a Letter of Intent?

A letter of intent is a written document that may clarify, declare, or safeguard a present or future transaction between 2 entities. The content of a letter of intent may be very similar to a contract, but is not binding. However, a letter of intent may contain binding provisions such as non-disclosure agreements.

A business or individual usually furnishes a letter of intent to another business entity in order to provide a general plan with regards to the transaction both are party to. This letter serves a tangible proof of the intention of one party to conduct deals with another. A business may receive many letters of intent that never materialize into an actual transaction. Such letters only provide the assurance of a possibility and never an actuality.

Letters of intent are not limited to business dealings only. These letters can also be used to state or declare an intention in relation to anything of importance. In sports, a letter of intent can be used to declare an interest in a player by a recruiting entity, while in real estate, the same letter may be used to express interest in obtaining a piece of property.

The general idea of using a letter of intent is to express a possibility or interest in any facet or aspect of another party. It may also be referred to as a memorandum of agreement or a term/discussion sheet. Either term is applicable under the rule of law to a written document expressing an interest.

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