letter of intent


Also found in: Dictionary, Thesaurus, Medical, Legal, Acronyms, Encyclopedia, Wikipedia.
Related to letter of intent: cover letter

Letter of intent

An assurance by a mutual fund shareholder that a certain amount of money will be invested monthly, in exchange for lower sales charges. In mergers, a preliminary merger agreement between companies after significant negotiations.

Letter of Intent

1. A document detailing a parent's wishes with regard to his/her minor children in the event of his/her death. For example, a letter of intent may state with whom the parent wants the children to live. While it is not a legal document, judges often use letters of intent along with other documents when determining the best interests of the children with regard to their future.

2. A document indicating a corporation's intent to undertake a merger or acquisition. A letter of intent outlines the details of the merger or acquisition, including the purchase price and whether it will be paid in cash, stock, and/or debt. It is important to note that a letter of intent it not legally binding and may not be enforced. However, an LOI shows that the company is serious in its intention and there may be reputational risk in not following it.

letter of intent

An agreement by a mutual fund shareholder to invest a specific sum over a defined period in order to qualify for reduced sales fees. The reduced fee may apply to an individual fund or to all the funds operated by an investment management group. Compare breakpoint. See also right of accumulation.

letter of intent (LOI)

A signed document between parties setting out the deal points on which they agree and leaving for later negotiation the minutia over which the lawyers will argue. In the absence of any limiting language in the LOI,it can be construed as a binding contract between the parties.Usually,however,the LOI will recite that it is only an expression of interest regarding the parties' mutual intent, that the parties have not reached an agreement regarding any terms or provisions of a contract,and the LOI is neither a contract,nor an offer capable of acceptance,nor evidence of a contract,but merely the current status of negotiations that might possibly lead to a contract.

References in periodicals archive ?
Unless extenuating circumstances exist, these sentences demonstrate an intention not to be bound and should provide strong protection against one party later claiming that the letter of intent is binding.
However, because of concerns raised by the case law, parties should consider whether the disclaimer should also address arguments that may later be used to support a claim that the letter of intent is binding.
Neither parry may claim any legal rights against the other by reason of actions taken in reliance upon this nonbinding letter of intent including, without limitation, any partial performance of the transactions contemplated herein.
In order to avoid a claim that the letter of intent included all essential terms of the agreement, the following provision may be added:
The parties acknowledge that this nonbinding letter of intent does not address all essential terms of the transaction contemplated by this letter and that such essential terms will be the subject of further negotiation.
As useful as these and other comparable disclaimers are in combating possible future claims that the letter of intent created a binding obligation, one must be careful to balance the legal concern of possible future claims against the practical (and more immediate) concern of successfully negotiating the letter of intent.
As discussed when negotiating a letter of intent, a careful balance must be reached between the conflicting goals of the letter of intent: the parties' desire to expeditiously reach agreement on fundamental business issues so as to provide a road map for further negotiation of the full agreement on the one hand, and the parties' desire to resolve all possible areas of contention to ensure that the deal will be done once the letter of intent is signed, on the other.
On the other hand, a letter of intent that lacks specificity or fails to address key issues may frustrate the purpose of using a letter of intent, since it leaves too many issues to the ultimate negotiations, increases overall negotiating time and legal fees, and possibly allows a deal to be lost after the letter of intent is "approved.
To help preserve the momentum of the deal, a party may consider it tactically advantageous to use a less detailed letter of intent, in order to avoid confronting difficult issues until the other party has executed the letter of intent and made a non-binding commitment to enter into the transaction.
Of course, this strategy may backfire on a shopping center owner if, by avoiding a difficult issue during letter of intent negotiations, the owner later learns that the tenant's formal policies prevent the parties from reaching agreement.
If one party anticipates that its leverage will increase at a later stage of negotiations because the other party will be locked in after execution of the letter of intent, the party with less negotiating leverage at the letter of intent stage will prefer less detail in the letter of intent in order to exploit its expected advantage when the parties will be on more equal footing when it comes to negotiating the ultimate agreement.