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Limit misunderstandings and show mutual commitment to the deal while still negotiating an agreement.
Discover best practices when crafting a letter that works for both parties.
Learn how to understand the terms of your letter of intent.
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In the process of negotiating an agreement, you may choose to first put an initial offer and some general terms into writing, rather than immediately putting the final terms into a document. This initial written document is called a letter of intent, and what it does is set out the basic terms of a proposed business transaction, including price, asset description, limitations, and closing conditions.
A letter of intent allows you to start negotiations from a consensus point, easing the way for the more formal contract. The letter of intent can also determine major issues and make it clear to you and the other party why the transaction is a good, or bad, idea, and whether or not you want to move forward. Finally, outside investors or other third parties may want to see evidence that an agreement is in the works, and the letter of intent can serve as such evidence before a final agreement is created.
If your transaction is fairly simple, you may not need a letter of intent. However, for more complicated transactions, having this document can help lay the foundation for a final agreement that both parties are satisfied with. Use LegalZoom's Letter of Intent for Business Transaction to set forth the basic terms of your proposed transaction.
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