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{{Short description|Type of document}} |
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{{For|the "letter of intent" in U.S. college sports|National Letter of Intent}} |
{{For|the "letter of intent" in U.S. college sports|National Letter of Intent}} |
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{{Globalize|article|USA|2name=the United States|date=March 2009}} |
{{Globalize|article|USA|2name=the United States|date=March 2009}} |
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[[File:loi m.gif|thumb|A typical LOI]] |
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A '''letter of intent''' ('''LOI''' or '''LoI''', or '''Letter of Intent''') is a document outlining the understanding between two or more parties which they intend to formalize in a [[contract|legally binding agreement]]. The concept is similar to a [[Heads of agreement (law)|heads of agreement]], [[term sheet]] or [[memorandum of understanding]]. Merger and acquisition agreements,<ref name=":0">{{Cite web|url = https://www.themalawyer.com/what-you-need-to-know-about-ma-letters-of-intent/|title = What you need to know about M&A letters of Intent|date = July 20, 2015|access-date = August 28, 2015|website = The M&A Lawyer Blog|publisher = Jasso Lopez PLLC|last = Lopez|first = Erik}}</ref> joint venture agreements, real property lease agreements and several other categories of agreements often make use of a letter of intent. |
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The capitalized form ''Letter of Intent'' may be used in legal writing, but only when referring to a specific document under discussion. |
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| ⚫ | A letter of intent may be presented by one party to another party and subsequently negotiated before execution (or signature). If carefully negotiated, |
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| ⚫ | LOIs resemble short, written [[contract]]s, often in tabular form. They are not binding on the parties in their entirety. Many LOIs, however, contain provisions that are binding, such as those governing [[non-disclosure agreement|non-disclosure]],<ref>DKLM LLP, [https://www.dklm.co.uk/site/library/commercialgeneral/lettersofintent.html Letters of Intent - Getting Them Right], accessed 9 August 2021</ref> [[governing law]], [[Exclusive right|exclusivity]] or a [[Covenant (law)|covenant]] to negotiate in [[good faith]].<ref name=":0" /> A LOI may sometimes be interpreted by a court of law as binding the parties to it if it too-closely resembles a formal contract and does not contain a clear disclaimer.<ref>{{Cite web|url = http://www.mintz.com/newsletter/2013/Advisories/3203-0713-NAT-COR/index.html|title = When a Non-binding Term Sheet Becomes Binding|date = July 8, 2013|access-date = December 28, 2023|website = Mintz Levin|publisher = Mintz Levin Cohn Ferris Glovsky and Popeo PC|last = Burwell|first = Robert|archive-url=https://web.archive.org/web/20130712011938/http://www.mintz.com/newsletter/2013/Advisories/3203-0713-NAT-COR/index.html|archive-date=July 12, 2013}}</ref> |
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Common purposes of an LOI are: |
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| ⚫ | A letter of intent may be presented by one party to another party and subsequently negotiated before execution (or signature). If carefully negotiated, a LOI may serve to protect both parties to a transaction. For example, a seller of a business may incorporate what is known as a non-solicitation provision, which would restrict the buyer's ability to hire an employee of the seller's business should the two parties not be able to close the transaction. On the other hand, a LOI may protect the buyer of a business by expressly conditioning its obligation to complete the transaction if it is unable to secure financing for the transaction.<ref>{{cite web|url=http://exitpromise.com/letter-of-intent-to-buy-or-sell-a-business/|title=Letter of Intent to Buy A Business - Exit Promise|date=11 March 2013|website=exitpromise.com|access-date=10 April 2018}}</ref> |
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;Common purposes of a letter of intent include<nowiki>:</nowiki> |
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*to express interest in a particular company or organization even if no relevant job is advertised <ref>{{cite web |title=What is a letter of intent and how to write it? |url=https://resumeperk.com/blog/what-is-a-letter-of-intent |language=en}}</ref> |
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* The parties may engage in protracted negotiations on only a subset of a deal’s terms |
* The parties may engage in protracted negotiations on only a subset of a deal’s terms |
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* Management time and focus may be diverted |
* Management time and focus may be diverted |
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* Alternative opportunities may be missed and markets may move against the parties during negotiations |
* Alternative opportunities may be missed and markets may move against the parties during negotiations |
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* Parties may reduce their lack of a workable deal framework into |
* Parties may reduce their lack of a workable deal framework into a LOI, with a hope of making progress later |
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* Public disclosure obligations may be inadvertently triggered |
* Public disclosure obligations may be inadvertently triggered |
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* The risk of leaks, exacerbated by the desire of some to tout the LOI to the world, or shop it to other parties<ref name=":0" /> |
* The risk of leaks, exacerbated by the desire of some to tout the LOI to the world, or shop it to other parties.<ref name=":0" /> |
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In the UK [[construction industry]], it has been noted that "a significant element" within the industry appears to be "content to have their commercial and legal relationships defined on the basis of a letter of intent rather than by clear and definite contracts", as a consequence of which problems "often arise" in relation to liability.<ref>Elder, N. (2006), [https://web.archive.org/web/20071009160812/http://www.brantassociates.com/news.htm Letters of Intent and Quantum Meruit – Easy Street or Skid Row?], ''Brant Associates'', published July 2006, archived 9 October 2007, accessed 11 August 2021</ref> [[Ampleforth College|Ampleforth Abbey Trust]] successfully sued [[project management]] firm Turner and Townsend in 2012 when the latter engaged a construction company to build residential accommodation for the Abbey's students, relying on a series of letters of intent instead of a formal contract. The Abbey's position was undermined in the absence of a contract, and Turner and Townsend had breached their [[duty of care in English law|duty of care]] in leaving the trust exposed without contractual protection.<ref>{{cite web |title=Case Note: Ampleforth Abbey Trust v Turner & Townsend |url=https://byrnewallace.com/news-and-recent-work/publications/case-note-ampleforth-abbey-trust-v-turner-townsend.html |website=byrnewallace.com |publisher=ByrneWallace LLP |access-date=31 July 2024 |date=2 November 2012}}</ref> |
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==Specific examples== |
==Specific examples== |
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{{See also|National Letter of Intent}} |
{{See also|National Letter of Intent}} |
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In [[academia]], a letter of intent, also often referred to as a statement of intent, is part of the admissions process of a particular academic program in graduate school. These letters often act as a pivotal decider for admission committees looking to understand an applicant's academic and professional goals, and their fit within the program. The document, akin to a cover letter for job applications, a statement of purpose, or an [[Admissions essay|application essay]], typically outlines an applicant's academic journey, their passion for the chosen field of study, and how the specific graduate program will help them achieve their career goals. |
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| ⚫ | In education in the [[United States]], letters of intent are also frequently reached between high school senior athletes and colleges/universities, for the reservation of [[athletic scholarship]]s for the athletes upon graduation from high school.<ref name=WSJ>{{cite news |title=In College Football Recruiting, The Star Player Is the Fax Machine |first=Darren |last=Everson |url=https://www.wsj.com/articles/SB10001424052748703445904576118213111942984 |newspaper=Wall Street Journal |date=February 2, 2011 |access-date=February 2, 2011}}</ref> [[Head teacher|School administrator]]s in [[secondary education]] often require a letter of intent before approving the formation of a [[Extracurricular activity|student club]]. |
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| ⚫ | In [[real estate]], in cases where the [[real property]] in question is not listed on a [[multiple listing service]], there may not be an easy way to notify the owner of the property and other interested parties of intent to purchase. Often it is necessary to officially begin the process of a purchase, and allow all peripheral interested parties to begin any other processes, with a letter of intent. For example, a multimillion-dollar loan for a commercial property may require a letter of intent before a financial institution will allow personnel to spend time working on said loan necessary for the completion of the sale. The same may be followed at the time of purchase by any company. A tenant and landlord may sign a letter of intent prior to signing a lease agreement to stipulate rental rates and all regulations of the future tenancy.{{ |
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| ⚫ | In [[real estate]], in cases where the [[real property]] in question is not listed on a [[multiple listing service]], there may not be an easy way to notify the owner of the property and other interested parties of intent to purchase. Often it is necessary to officially begin the process of a purchase, and allow all peripheral interested parties to begin any other processes, with a letter of intent. For example, a multimillion-dollar loan for a commercial property may require a letter of intent before a financial institution will allow personnel to spend time working on said loan necessary for the completion of the sale. The same may be followed at the time of purchase by any company. A tenant and landlord may sign a letter of intent prior to signing a lease agreement to stipulate rental rates and all regulations of the future tenancy.{{citation needed|date=October 2017}} |
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| ⚫ | In the [[solicitation]] of government grants, a letter of intent is highly encouraged but it is not required or binding, and does not enter into the review of a subsequent application. |
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| ⚫ | In the [[solicitation]] of [[US government]] grants, a letter of intent is highly encouraged, but it is not required or binding, and does not enter into the review of a subsequent application. The information that it contains allows agency staff to estimate the potential workload and plan the review.<ref name="WSHCA">Typical example: {{Citation|title=2008 Grant Solicitation for Consumer-Controlled Health Record Bank Pilots |url=http://www.hca.wa.gov/hit/documents/officialhrbgrant051408.pdf |access-date=2008-05-21 |publisher=Washington State Health Care Authority |url-status=dead |archive-url=https://web.archive.org/web/20080723192909/http://www.hca.wa.gov/hit/documents/officialhrbgrant051408.pdf |archive-date=July 23, 2008 }}</ref> |
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==Case Study== |
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'''Tesco Vs Costain 1980''' |
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In 1980, Tesco has issued a Letter of intent to Costain for complete a new store on design and build basis. Costain has completed the works based on the LOI. and after some time fire broke down in the newly built store.Tesco is arguing that, due to lack of measures taken by Costain in the design stage, harm was slight high by the fire compared to normal conditions. And Costain is denying the Tesco's point mentioning that there was no legal contract between both parties and they were not responsible for the damage happen, However, Court is deciding that the LOI issued was a legal binding document, but Costain is not responsible for the design measures done at the initial stage. Therefore LOI can be a Legal binding document when it was outlined and detailed deliverable such as time, quality etc.<ref>Quantity Surveyor. (2019). What is the letter of Intent?. [online] Available at: https://quantitysurveyor.home.blog/2019/08/02/what-is-the-letter-of-intent/ [Accessed 2 Aug. 2019].</ref> |
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==See also== |
==See also== |
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==References== |
==References== |
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{{Authority control}} |
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[[Category:Legal documents]] |
[[Category:Legal documents]] |
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[[Category:Intention]] |
[[Category:Intention]] |
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Latest revision as of 03:18, 31 July 2024
 | The examples and perspective in this article deal primarily with the United States and do not represent a worldwide view of the subject. (March 2009) |
A letter of intent (LOI or LoI, or Letter of Intent) is a document outlining the understanding between two or more parties which they intend to formalize in a legally binding agreement. The concept is similar to a heads of agreement, term sheet or memorandum of understanding. Merger and acquisition agreements,[1] joint venture agreements, real property lease agreements and several other categories of agreements often make use of a letter of intent.
The capitalized form Letter of Intent may be used in legal writing, but only when referring to a specific document under discussion.
LOIs resemble short, written contracts, often in tabular form. They are not binding on the parties in their entirety. Many LOIs, however, contain provisions that are binding, such as those governing non-disclosure,[2] governing law, exclusivity or a covenant to negotiate in good faith.[1] A LOI may sometimes be interpreted by a court of law as binding the parties to it if it too-closely resembles a formal contract and does not contain a clear disclaimer.[3]
A letter of intent may be presented by one party to another party and subsequently negotiated before execution (or signature). If carefully negotiated, a LOI may serve to protect both parties to a transaction. For example, a seller of a business may incorporate what is known as a non-solicitation provision, which would restrict the buyer's ability to hire an employee of the seller's business should the two parties not be able to close the transaction. On the other hand, a LOI may protect the buyer of a business by expressly conditioning its obligation to complete the transaction if it is unable to secure financing for the transaction.[4]
Purposes
[edit]- Common purposes of a letter of intent include:
- allowing parties to sketch out fundamental terms quickly before expending substantial resources on negotiating definitive agreements, finalizing due diligence, pursuing third-party approvals and other matters[1]
- to declare officially that the parties are currently negotiating, as in a merger or joint venture proposal
- to provide safeguards in case a deal collapses during negotiation
- to verify certain issues regarding payments made for someone else (e.g. credit card payments)
- to express interest in a particular company or organization even if no relevant job is advertised [5]
- Potential downsides to using a LOI may include:
- The parties may engage in protracted negotiations on only a subset of a deal’s terms
- Management time and focus may be diverted
- Alternative opportunities may be missed and markets may move against the parties during negotiations
- Parties may reduce their lack of a workable deal framework into a LOI, with a hope of making progress later
- Public disclosure obligations may be inadvertently triggered
- The risk of leaks, exacerbated by the desire of some to tout the LOI to the world, or shop it to other parties.[1]
In the UK construction industry, it has been noted that "a significant element" within the industry appears to be "content to have their commercial and legal relationships defined on the basis of a letter of intent rather than by clear and definite contracts", as a consequence of which problems "often arise" in relation to liability.[6] Ampleforth Abbey Trust successfully sued project management firm Turner and Townsend in 2012 when the latter engaged a construction company to build residential accommodation for the Abbey's students, relying on a series of letters of intent instead of a formal contract. The Abbey's position was undermined in the absence of a contract, and Turner and Townsend had breached their duty of care in leaving the trust exposed without contractual protection.[7]
Specific examples
[edit]In academia, a letter of intent, also often referred to as a statement of intent, is part of the admissions process of a particular academic program in graduate school. These letters often act as a pivotal decider for admission committees looking to understand an applicant's academic and professional goals, and their fit within the program. The document, akin to a cover letter for job applications, a statement of purpose, or an application essay, typically outlines an applicant's academic journey, their passion for the chosen field of study, and how the specific graduate program will help them achieve their career goals.
In education in the United States, letters of intent are also frequently reached between high school senior athletes and colleges/universities, for the reservation of athletic scholarships for the athletes upon graduation from high school.[8] School administrators in secondary education often require a letter of intent before approving the formation of a student club.
In real estate, in cases where the real property in question is not listed on a multiple listing service, there may not be an easy way to notify the owner of the property and other interested parties of intent to purchase. Often it is necessary to officially begin the process of a purchase, and allow all peripheral interested parties to begin any other processes, with a letter of intent. For example, a multimillion-dollar loan for a commercial property may require a letter of intent before a financial institution will allow personnel to spend time working on said loan necessary for the completion of the sale. The same may be followed at the time of purchase by any company. A tenant and landlord may sign a letter of intent prior to signing a lease agreement to stipulate rental rates and all regulations of the future tenancy.[citation needed]
In the solicitation of US government grants, a letter of intent is highly encouraged, but it is not required or binding, and does not enter into the review of a subsequent application. The information that it contains allows agency staff to estimate the potential workload and plan the review.[9]
See also
[edit]References
[edit]- ^ a b c d Lopez, Erik (July 20, 2015). "What you need to know about M&A letters of Intent". The M&A Lawyer Blog. Jasso Lopez PLLC. Retrieved August 28, 2015.
- ^ DKLM LLP, Letters of Intent - Getting Them Right, accessed 9 August 2021
- ^ Burwell, Robert (July 8, 2013). "When a Non-binding Term Sheet Becomes Binding". Mintz Levin. Mintz Levin Cohn Ferris Glovsky and Popeo PC. Archived from the original on July 12, 2013. Retrieved December 28, 2023.
- ^ "Letter of Intent to Buy A Business - Exit Promise". exitpromise.com. 11 March 2013. Retrieved 10 April 2018.
- ^ "What is a letter of intent and how to write it?".
- ^ Elder, N. (2006), Letters of Intent and Quantum Meruit – Easy Street or Skid Row?, Brant Associates, published July 2006, archived 9 October 2007, accessed 11 August 2021
- ^ "Case Note: Ampleforth Abbey Trust v Turner & Townsend". byrnewallace.com. ByrneWallace LLP. 2 November 2012. Retrieved 31 July 2024.
- ^ Everson, Darren (February 2, 2011). "In College Football Recruiting, The Star Player Is the Fax Machine". Wall Street Journal. Retrieved February 2, 2011.
- ^ Typical example: 2008 Grant Solicitation for Consumer-Controlled Health Record Bank Pilots (PDF), Washington State Health Care Authority, archived from the original (PDF) on July 23, 2008, retrieved 2008-05-21
