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A letter of intent can be thought of as an initial proposal for a business agreement. A letter of intent is often drawn up and submitted prior to the time that a formal proposal or contract is settled upon.
In most cases, a letter of intent is not considered a legally binding agreement. Instead, a letter of intent is generally used to outline a business proposal in advance, thereby assisting the parties in negotiating or clarifying the final terms of a contract or business agreement before the agreement becomes legally binding. -
When drafting a letter of intent, it is important to think through all of the terms to be included in the final contract. Important points to cover include:
1. Who are the parties that will enter into the contract?
2. What is the main purpose of the contract?
3. How long will the contract last?
4. What are the responsibilities of each party involved?
5. What happens if the terms of the contract are violated by one or more of the parties?
Depending on the specific circumstances involved, you may decide to include other relevant information in the letter of intent. -
It is important that a letter of intent be carefully worded, so as to differentiate it from a formal contract or agreement.
Include words or phrases such as "initial proposal" or "proposed agreement between" to ensure that the document is not later construed as legally binding.
It is also vital that the letter of intent include a statement that clarifies it as a non-binding agreement, such as: "The terms of this document are not to be considered as legally binding." -
The letter of intent should serve as a springboard for formal negotiation of a contract or agreement. Both parties are free to suggest changes, ask for additional information or request clarification of the proposed terms.
Letters of intent are most often used prior to submitting formal grant applications, solidifying major business agreements or entering into formal service contracts.
On occasion a letter of intent may be sent along with a work resume. This is generally acceptable when applying for certain types of jobs that require salary and contract negotiations in advance of formal hiring.
Once all of the parties involved have agreed to the terms as outlined in the letter of intent, a formal contract is drawn up and signed in front of witnesses, so as to become a legally binding agreement.
