Although this document is typically nonbinding, it can help both parties record the primary terms that two parties agree upon before conducting business together.īy completing this letter, both business parties agree that they hope to formalize their plan with a legally binding contract or document and acknowledge the letter of intent as the first official step toward completing an official transaction. Companies typically use a letter of intent in acquisitions and mergers to identify and track the preliminary terms of an agreement. Related: How To Write a Letter of Intent (With Examples and Writing Tips) What is a letter of intent?Ī letter of intent is a document an organization can use to declare its preliminary commitment to do business with another party. In this article, we define what a letter of intent and a memorandum of understanding are and describe the differences and similarities between them. Understanding the purpose of these documents can help you determine which to use in various collaborative or transactional situations for your organization. They may use a letter of intent or a memorandum of understanding to establish guidelines for a deal and outline responsibilities and contributions that both parties have agreed to and discussed. Companies and other organizations may use various documents to identify and acknowledge aspects of an agreement or understanding when doing business with another party.
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