How to Avoid Traps in Letters of Intent

A letter of intent (LOI) is a common way for companies to set forth expectations as they work out the final details of a deal that may become a binding contract.

LOIs are also sometimes referred to as term sheets, memorandums of understanding or a list of terms, among other less formal titles. The title usually depends upon the industry and the purpose of the document.

LOIs are sometimes intended by the parties to draw a binding outline of an agreement, with the details to be fine-tuned later, and sometimes an LOI is intended just as a nonbinding launch point for negotiations. Letters of intent are utilized in deals across many legal areas, including business ventures, licensing deals, mergers, private equity,intents to vacatecommercial real estate sales and leasing. The detail and extent of letters of intent vary widely with the marketplace.

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How to Avoid Traps in Letters of Intent

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