Letter of Intent (LOI)

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Definition of 'Letter of Intent (LOI)'

A letter of intent (LOI) is a written document expressing a party's willingness to enter into a contract at a future date. It is not a legally binding contract, but it does create a binding obligation to negotiate in good faith.

LOIs are often used in business transactions, such as mergers and acquisitions, to express a party's interest in acquiring another company. They can also be used in real estate transactions, to express a party's interest in purchasing a property.

LOIs typically include information such as the proposed terms of the transaction, the proposed purchase price, and the proposed closing date. They may also include a confidentiality agreement, which prevents the parties from disclosing the terms of the LOI to third parties.

Once an LOI is signed, the parties are obligated to negotiate in good faith. This means that they must make every effort to reach an agreement on the terms of the transaction. If the parties are unable to reach an agreement, the LOI can be terminated.

LOIs are important because they can help to formalize a party's interest in a transaction and to start the negotiation process. They can also help to protect the parties from disclosing confidential information to third parties.

However, it is important to note that LOIs are not legally binding contracts. This means that the parties are not obligated to complete the transaction. If one of the parties changes their mind, they can simply terminate the LOI.

As a result, it is important to carefully review the terms of an LOI before signing it. If you have any questions about the LOI, you should consult with an attorney.

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