Letter of Intent (LOI): Meaning, Format, Templates & Examples

Most deals don’t fail because one side is “more right.” They fail when assumptions replace written terms—so the parties think they agreed, but they’re actually negotiating different prices, timelines, and responsibilities. A letter of intent (LOI) is used to lock the “headline terms” early—before anyone spends real money on diligence, inspections, or drafting the definitive agreement.

This guide explains when an LOI is worth using (and when it’s unnecessary), what a practical letter of intent format looks like, how templates differ by scenario, and why “non-binding” can still create real obligations.

Disclaimer: This article is general information, not legal advice, and state laws and outcomes vary; for contract basics, see Cornell Law School’s Legal Information Institute overview of contracts. If the stakes are high (large dollar amounts, multi-state issues, or regulatory risk), consider a U.S. lawyer review before you sign.

TL;DR

• A letter of intent (LOI) is a practical pre-contract document that summarizes key terms so both sides stop negotiating in the dark.

• Use an LOI when the deal needs diligence, deadlines, or a clear roadmap (economics, milestones, conditions, next steps) before heavy drafting costs start.

• Most LOIs are non-binding on the obligation to close, but they often include binding carve-outs like confidentiality, exclusivity/no-shop, and cost allocation.

• A strong LOI makes the next phase executable: who does what, by when, and what happens if conditions aren’t met (financing/approvals/inspections/consents).

• Start with the closest LOI template for your scenario (business, real estate (purchase/sale) and commercial lease, employment) so you don’t force the wrong deal logic into the draft.

• If the stakes are high (large dollar amounts, regulatory issues, multi-state risk, or a sophisticated counterparty), consider a U.S. lawyer review before signing.

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What Is a Letter of Intent (LOI)? (Meaning, Definition, and Purpose)

Meaning and definition

Working definition: A letter of intent (LOI) is a written document that outlines proposed key terms of a transaction and the parties’ intent to continue negotiating toward a definitive agreement.

Plain-English meaning: It’s a deal snapshot that keeps both sides aligned on the big terms before they spend heavily on diligence and drafting.

In the U.S., LOIs show up in business transactions, real estate, employment moves. The shared purpose is the same: reduce misunderstandings by putting the plan in one place instead of scattering it across emails, texts, and calls. For a plain-language definition, see Cornell Law School’s Legal Information Institute overview of letters of intent.

What an LOI does (and what it doesn’t)

A practical LOI forces early clarity on the terms that are expensive to “re-negotiate later”: the basic economics, the target timeline, what diligence happens, and what conditions must be met. It’s also a process tool—built to move the deal toward a definitive agreement, not to replace it.

At the same time, an LOI typically does not include the full set of contract mechanics (detailed reps/warranties, remedies, indemnities, compliance language, and closing deliverables). If you try to make the LOI do the definitive agreement’s job, you usually create more risk—not less.

Pro tip: If you can’t summarize the economics + the timeline in plain English, you’re probably not ready to pay for heavy drafting yet. An LOI is often the cheapest place to discover misalignment.

What an LOI typically includes (high level)

A strong letter of intent format usually covers:

• the parties and the deal being discussed

• headline economics (price/rent/consideration structure at a high level)

• timeline + milestones (including any diligence window)

• key “subject to” conditions (financing/approvals/inspections/consents)

• a clear binding vs non-binding statement

• signatures / authority

Short letter of intent example (style-only)

This excerpt isn’t a full template—it’s just to show the tone and level of specificity that works.

Date: March 5, 2025
Re: Proposed Asset Purchase — ABC Fitness LLC
This letter outlines the parties’ intent to negotiate an asset purchase on the terms below.
Purchase Price: $1,250,000, subject to adjustments in the definitive agreement.
Due Diligence: Buyer will have 30 days to review financials, contracts, and key operations items.
Exclusivity: Seller will not solicit competing offers for 21 days from signature of this LOI.
Non-Binding: Except for Sections 7–9 (Confidentiality, Exclusivity, Costs), this LOI is non-binding.

If you want to start fast, download the general Letter of Intent (LOI) template to get started, or use AI Lawyer to generate a draft from your scenario — then keep reading for templates tailored to specific LOI types (business acquisition/merger, partnership or joint venture, investment, real estate purchase or lease, employment/promotion).

LOI vs Similar Documents (Term Sheet, MOU, Heads of Terms)

These documents solve the same practical problem: they let you align on the “big terms” before you pay for heavy drafting. The confusion is mostly branding—people say “LOI,” “term sheet,” and “MOU” as if they’re interchangeable, even when they’re trying to lock different things.

The quickest way to choose is to ask what the negotiation is really about right now. Are you trying to map a transaction (what’s being bought/leased and what happens next), lock a financing structure (valuation + investor rights), or outline a collaboration (roles + responsibilities without a classic “closing”)? Once you identify the center of gravity, the right document usually picks itself.

LOI: best when the deal needs a roadmap

A letter of intent (LOI) fits best when the parties need a shared path from “agreement in principle” to the definitive agreement. An LOI earns its keep when it creates an executable roadmap—headline economics, timeline/milestones, diligence window, key conditions, and (if needed) exclusivity/no-shop.

This is why LOIs are common in acquisitions and real estate. Drafting gets expensive fast when the parties aren’t truly aligned, and the LOI is often the cheapest place to discover that misalignment early.

Term sheet: best when the money structure is the negotiation

A term sheet shows up most in investment or financing deals. A term sheet is the right tool when the hard part is the financial architecture—valuation/price logic, the security/instrument, investor rights, governance/control points, and closing conditions.

There’s overlap in real life: some “term sheets” read like transaction roadmaps, and some LOIs include term-sheet style economics. The label matters less than what the document is built to decide. For investor-side context in private placements, see FINRA’s guidance on private placement filings and offering materials.

MOU: best when collaboration is the point

A memorandum of understanding (MOU) is typically used when the parties are describing cooperation rather than a purchase/sale transaction—pilots, early partnerships, shared projects, or “we intend to work together on X.” An MOU works best when it clarifies scope, roles, and responsibilities without pretending the final contract is already done.

Also, don’t let the title lull you into complacency. Calling it an MOU doesn’t automatically make it non-binding if the text reads like a final commitment. For a simple legal-affairs-style description of how MOUs are framed, see Georgia Tech’s overview of memorandums of understanding.

Heads of terms: mostly a naming choice (still needs discipline)

“Heads of terms” (or “heads of agreement”) shows up more in UK-style or cross-border deals, but you’ll see it in U.S. practice when one side prefers the label. Functionally, it often plays the same role as an LOI: a headline summary of intended terms before the definitive agreement. The key is to draft it with the same clarity on timeline and what is binding vs. non-binding.

Pro tip: If you need to control a diligence period or an exclusivity/no-shop window, an LOI-style roadmap is usually the cleanest way to do it—because it naturally forces deadlines, deliverables, and carve-outs into one place.

Here’s the simplest “pick the tool” rule (one quick list):

• Use a letter of intent (LOI) when you’re negotiating a transaction and you need a roadmap (economics + timeline + diligence + conditions, and possibly exclusivity).

• Use a term sheet when the negotiation is primarily about financing/investment terms and the money structure is the core issue.

• Use an MOU when the negotiation is primarily about collaboration (scope/roles) without a classic “closing.”

• Use heads of terms when that’s the terminology your counterparty expects, but draft it with LOI-level clarity on timing and binding vs. non-binding.

When Do You Need a Letter of Intent?

A letter of intent (LOI) is worth using when writing the “headline terms” will save you time, money, or leverage. If you can already sign a short, clean agreement today, an LOI can be extra paperwork. But if the deal has moving parts—diligence, approvals, timing pressure, or economics that can be interpreted two ways—an LOI is often the cheapest way to prevent a costly misunderstanding.

You’re most likely in LOI territory when someone is about to spend real resources before the definitive agreement exists: attorney drafting, inspections, lender work, appraisals, third-party reports, or internal approval cycles. That’s why LOIs are common in business purchases and real estate deals: once lawyers, lenders, inspectors, and third parties get involved, the cost of “figuring it out later” spikes.

A practical reference point: the U.S. Small Business Administration’s guidance on buying an existing business highlights the kind of diligence and planning that often happens before a final purchase agreement—exactly the stage where an LOI can keep expectations aligned.

The 30-second decision logic (in plain English)

If you need time to verify facts (diligence/inspections), use an LOI to set the window and the deadline. If one side wants you to pause alternatives (exclusivity/no-shop), use an LOI to time-box it and define the boundaries. If the “price” is really a structure (deposit, adjustments, earn-out concept, concessions, CAM/NNN mechanics), use an LOI to lock the structure before drafting. If none of that applies and you can sign a simple contract now, you can often skip the LOI.

When you can usually skip it

You can often skip an LOI when the transaction is simple, the parties are already aligned, and a short standard agreement can be signed immediately. It’s also commonly unnecessary when stakes are low, there’s little to verify, and you don’t need exclusivity or a defined diligence window. In some financings, a term sheet already does the alignment job, so adding an LOI can be redundant.

Micro-takeaway: An LOI is a tool, not a requirement. Use it when it turns “we think we agree” into a timeline you can actually execute—then move straight to the definitive agreement.

Binding vs Non-Binding LOI (and the “Partially Binding” Reality)

People often treat a “non-binding letter of intent” as if it means “safe.” In practice, “non-binding” usually means there’s no obligation to close — not that nothing can be enforced. Most LOIs are intentionally partially binding: the deal terms stay flexible, while a few process rules are enforceable to protect the negotiation.

What “non-binding” usually means

In a typical LOI, non-binding language is meant to show the parties are aligning on proposed terms and next steps, not signing the final contract. The goal is speed and clarity: confirm you’re negotiating the same deal before you spend heavily on diligence and drafting. (For a plain-language baseline on contract concepts, see Cornell Law School’s contract overview.)

What can still be binding (common carve-outs)

Even when the LOI is non-binding on closing, it often includes enforceable sections — because negotiations create real risks that need rules. The most common binding carve-outs are:

• Confidentiality is enforceable when you rely on it to share sensitive info (especially if there’s no separate NDA). For why written confidentiality matters, see Cornell’s overview of trade secrets.

• Exclusivity / no-shop is enforceable when one side needs protection while spending money on diligence and counsel.

• Costs/fees allocation is enforceable when you want to avoid “who pays” fights over legal fees, inspections, reports, and advisors.

• Governing law / venue can be enforceable when it’s tied to binding sections (so disputes don’t start with “where do we fight?”).

• No-reliance / no-obligation language can be enforceable when it prevents “you promised” arguments based on preliminary discussions.

How to draft the split cleanly

The safest structure is simple: one global sentence that the LOI does not require either party to close, and a second sentence that lists exactly which sections are binding. Then match the verbs to your intent: use “intend,” “contemplate,” and “subject to definitive agreement” for deal terms — and reserve “shall/agree” for the binding carve-outs only.

Practical takeaway: A non-binding LOI can still contain binding commitments — and that’s normal. The key is clarity: separate deal intent from enforceable process rules so nobody “accidentally” creates a contract.

Letter of Intent Format (Core Structure + Key Deal Points)

A good letter of intent format is not “more legal.” It’s more organized. The best LOIs read like a roadmap you can actually run—clear enough to start diligence, move to the definitive agreement, and hit deadlines without unnecessary friction.

You’ll see an LOI written as a letter, a memo, or a short agreement-style document. The format matters less than whether the document forces the key deal points into writing. If the substance is clear, the layout is secondary.

The core structure (plain order)

Parties and background: Identify who is negotiating (full legal names, entity type, and address) and add a brief context snapshot.

Transaction overview: Describe what is being discussed—asset purchase vs stock purchase, merger concept, partnership/JV scope, or (for real estate) the specific property and deal type.

Price / consideration (high level): State the headline number and the basic structure (deposit concept, adjustments concept, earn-out concept, or lease economics).

Timeline + milestones: Add the dates that control momentum: diligence window, draft delivery targets, and target signing/closing (if applicable).

Due diligence window (scope + timing): Define the window and scope at a high level (business: financial/legal/operational; real estate: inspections/title/zoning/environmental).

Conditions precedent (“subject to” items): Identify the key conditions that must be met before closing (financing, internal approvals, third-party consents, inspections, regulatory approvals).

Confidentiality approach: Either reference a separate NDA or include confidentiality terms in the LOI if sensitive information will be shared.

Exclusivity / no-shop (if needed): If requested, define what is restricted, how long it lasts, and any exceptions.

Costs / fees allocation: Decide who pays legal fees, diligence costs, and third-party reports.

Governing law / dispute resolution (optional): Include only if it helps clarify binding sections or process expectations.

Non-binding statement + binding carve-outs: Add one clear non-binding statement, then list any sections that are binding (if any).

Signatures: Include accurate signature blocks (entity name, signatory name/title, execution method).

Template note: A letter of intent template document is best used as structure, not as a script. Fill deal points first (economics + timeline + conditions), then tighten language, then label binding vs non-binding.

Table: key deal points to specify (fast reference)

LOI Types and Templates by Scenario

A letter of intent (LOI) is not one-size-fits-all. The biggest template mistake is starting from the wrong scenario format, because each deal type has different “must-capture” terms. Use this section to quickly identify the closest scenario category; the template table in the next section will help you select the best starting document, and later sections will cover structure and common mistakes.

Business LOIs

M&A / acquisition (business purchase): Use an acquisition-style LOI when diligence, deal structure, and timeline must be set before drafting definitive documents. This is the classic “buy a business” situation: align on scope, economics, conditions, and the deal process before legal drafting gets expensive. The LOI should force clarity on structure (asset vs. stock vs. merger), diligence scope, and closing conditions.

Partnership / joint venture: Use a partnership/JV LOI when the parties agree on “working together,” but money, control, and responsibilities aren’t finalized. These LOIs work best when they lock scope, governance, decision rights, and contributions early so expectations don’t drift. If the relationship involves shared assets, shared IP, or shared revenue, the LOI should define ownership, control, and exit mechanics up front.

Distribution / franchise: Use a distribution-style LOI when territory and exclusivity are the core negotiation, and use a franchise-style LOI when location/territory, timing, and fee concepts need early alignment. These LOIs should surface the commercial model (exclusive vs. non-exclusive, performance requirements, brand controls, and renewal/termination triggers) before the long-form agreement is drafted.

Consulting services: Use a services LOI when scope and deliverables must be agreed before a services agreement or SOW. A good services LOI makes deliverables and timing measurable, so “scope” doesn’t become a moving target. The LOI should define what “done” means, how changes are handled, and what happens if timelines slip.

Investment: Use an investment LOI (often term-sheet style) when valuation/pricing concepts, core rights, and closing conditions need alignment before legal docs. The LOI should keep the financing architecture coherent—security type, pricing mechanics, governance/consent rights, information rights, and closing prerequisites—so later documents don’t reinvent the deal midstream.

General baseline: Use a general LOI when you need a neutral structure quickly and the deal type isn’t fully clear yet. The goal is speed and clarity: capture the headline economics, timeline, diligence path, and any intended binding carve-outs. Once the transaction shape is known, switching to the closest scenario format prevents “missing terms” that later become expensive to negotiate.

Real Estate LOIs

Purchase (buyer-side): Use a real estate purchase LOI when price, inspection/diligence, and closing timeline must be aligned before the purchase agreement gets detailed. The LOI should make the diligence period real (scope + deadlines), define key contingencies, and prevent ambiguity around deposits, allocations, and closing deliverables.

Sale (seller-side): Use a seller-oriented LOI when you want to frame the deal terms and keep conditions and timeline clean. The LOI should control the process: what the buyer must prove (funds, approvals), what deadlines apply, and how long the seller is willing to stay “off the market” (if at all).

Land purchase: Use a land purchase LOI when feasibility, zoning/entitlements, access/utilities, or environmental questions control the deal. The key is a diligence/feasibility period with a firm end date and clear deliverables, so the transaction doesn’t drift. The LOI should define who pursues approvals, who pays for studies, and what happens if approvals fail.

Commercial lease: Use a commercial lease LOI when business terms must be locked before the lease draft becomes dense. Most lease surprises live in operating costs, build-out terms, and renewal/termination mechanics—not just the headline rent. The LOI should surface those mechanics early, including TI/build-out, CAM/operating expenses, use restrictions, and options.

Employment / Promotion / Job Application LOIs

Employment offer: Use an employment LOI when you need a clean outline of role, compensation, start date, and contingencies before onboarding or before a full employment agreement. The LOI should eliminate ambiguity around compensation structure and any “if/then” conditions (background checks, eligibility, approvals).

Promotion: Use a promotion LOI when you need a clear record of title, pay change, and effective date. The LOI should capture what changed (and what didn’t), including reporting line, scope, and any updated incentives or targets.

Job application: Use a job-application LOI when a posting asks for it or when you want a structured “intent + fit + value” pitch. The strongest letters are specific and evidence-based: what you’re pursuing, why you match, and what outcomes you can deliver.

Binding posture templates

Sometimes the key variable isn’t the scenario—it’s enforceability posture. Template selection should reflect your intended legal posture, because “non-binding” does not mean “no consequences.” A non-binding LOI should clearly separate non-binding deal points from binding carve-outs (like confidentiality, exclusivity, costs, and governing law). A binding LOI should be used only when the parties truly intend enforceable commitments at the LOI stage and are prepared for that legal consequence.

LOI Template Library

Templates are a fast way to start, but they work best when you treat them as the closest match to your scenario—not a one-click legal solution. The right template is the one that matches your deal type and forces the “must-capture” terms into writing early. Use the table below to pick the best starting point; later sections will cover structure and common mistakes.

How to Use a Letter of Intent Template Safely (Step-by-Step)

Templates save time, but the “safety” comes from how you complete, sign, and store them. A finished letter of intent template should read like a specific deal between specific parties—at a specific price/rent, on a specific timeline—backed by a simple diligence plan and a clean binding vs non-binding split.

Step 1 — Pick the closest LOI template for your scenario

Start with the template that matches the real structure of the deal (business acquisition vs. real estate purchase vs. commercial lease vs. employment). The wrong scenario template doesn’t just “look off”—it causes missing terms you only discover after leverage shifts. Match the template to what you’re actually negotiating: transaction roadmap, financing architecture, or collaboration scope.

Output: A chosen starting template + a one-sentence label for the deal type (e.g., “asset purchase LOI,” “commercial lease LOI,” “employment offer LOI”) + a short list of 3–5 terms you must capture in this scenario.

Step 2 — Fill the facts that make the LOI enforceable in practice

Most LOI failures aren’t legal—they’re factual. Use correct legal names (and entity type), add notice contact info, and describe the deal clearly enough that “the transaction” can’t be misunderstood. Make the economics and calendar measurable: headline price/rent, deposit/earnest money concept (if any), diligence window, and target signing/closing milestones.

Output: A “facts-complete” draft with (1) parties identified correctly, (2) transaction described plainly, (3) headline economics stated, and (4) a dated timeline section (diligence + target milestones).

Step 3 — Add process terms: diligence, conditions, and who does what by when

A useful LOI is a roadmap. Define a diligence window with an end date, high-level categories of review, and access method. List key “subject to” items (financing, approvals, consents, inspections) so nobody assumes the deal is locked before the unknowns are resolved. If exclusivity/no-shop is requested, time-box it and define what’s restricted and what isn’t.

Output: A complete “process package” inside the LOI: (1) diligence scope + deadline, (2) conditions precedent list, (3) deliverables & owners (who provides what), and (4) exclusivity terms (only if used) with a firm end date.

Step 4 — Make the binding vs non-binding split unmistakable

This is the control panel. Keep one clear statement that there is no obligation to close until a definitive agreement is signed, then explicitly name any binding carve-outs (commonly confidentiality, exclusivity/no-shop, cost allocation, sometimes governing law/venue). Use intent language in deal terms (“intend,” “contemplate,” “subject to definitive agreement”) and reserve contract-style verbs for the sections you truly want binding.

Output: A final LOI where (1) the global non-binding statement is explicit, (2) binding sections are listed by name/number, and (3) deal terms use “intent” verbs consistently.

Step 5 — Sign, deliver, and store the “proof file” so the LOI actually works

Execution problems kill good LOIs: mismatched versions, missing exhibits, unclear deadlines, and messy email trails. Use one final version, circulate the same PDF, and keep a clean record of what was signed and when. After signing, run the timeline: start diligence immediately, track the diligence deadline and exclusivity end date, and document extensions in writing.

Output: A single “LOI proof file” containing: (1) executed LOI (final PDF), (2) any referenced attachments (NDA, term sheet, diligence request list if used), (3) delivery proof (email thread or signature platform record), and (4) a simple deadline tracker (diligence end date + exclusivity end date + target milestones).

Legal Requirements and Regulatory Context (U.S.)

This section is general U.S. information (not legal advice). State law varies, and the right requirements depend on the deal type (business, real estate, employment) and where the parties are located.

State law sets the baseline (contracts + consumer rules)

There is no single “national LOI law.” Most enforceability questions run through state contract law (offer/acceptance/consideration, intent, reliance, remedies). If you want a plain-language refresher on contract fundamentals, Cornell’s Legal Information Institute (LII) is a solid starting point: Contracts (LII overview).

When a writing matters (Statute of Frauds)

Some deals (especially real estate and other categories covered by state “statute of frauds” rules) may require key terms to be in writing to be enforceable. Even when an LOI is “non-binding,” sloppy wording can create arguments about what was actually promised. See: Statute of Frauds (LII overview).

E-signatures and electronic records (often OK, but confirm fit)

LOIs are commonly signed electronically in the U.S. Federal law generally supports electronic signatures and records in many transactions (with exceptions), and many states follow UETA-style rules. For background checkpoints:

• E-SIGN Act (15 U.S.C. § 7001)

• Uniform Electronic Transactions Act (UETA) — Uniform Law Commission overview

“If relevant” regulatory checkpoints (deal-specific)

• M&A size/structure: Some acquisitions may trigger HSR premerger notification obligations. If your deal is anywhere near that territory, start here: FTC — Premerger Notification Program (HSR).

• Investment / fundraising: If your LOI is effectively teeing up a securities offering, make sure you understand the compliance lane your counsel expects (often discussed under “exempt offerings”). Start here: SEC — FAQs about Exempt Offerings (Reg D / Rule 506 context).

• Confidential info / diligence: If you’re exchanging sensitive business information, don’t rely on vibes—use an NDA or a clearly binding confidentiality clause, and use reasonable secrecy steps. A practical starting point: USPTO — Trade Secrets resources.

Practical takeaway: Your LOI can set process rules (diligence, deadlines, confidentiality, exclusivity), but it can’t override mandatory law. If the stakes are high (large dollars, regulated industries, multi-state exposure, sophisticated counterparties), a U.S. lawyer review is usually worth it.

Common Mistakes to Avoid (Expanded)

Most LOI problems aren’t “legal technicalities.” They happen because the document is vague where it must be specific—deadlines, diligence scope, price mechanics, and the binding vs non-binding split. A practical letter of intent (LOI) prevents expensive misunderstandings by forcing the sensitive terms into writing early, before diligence and drafting costs spiral.

1) Exclusivity/no-shop with no clear end date

Exclusivity can be reasonable when one side is investing time and money in diligence. But a no-shop clause without a firm end date can trap you in limbo—you stop pursuing alternatives while the other side slows down. Fix it by time-boxing the restriction, defining what “no-shop” covers (solicit vs negotiate vs sign), and adding narrow exceptions (for inbound inquiries, fiduciary duties, or pre-existing discussions when appropriate).

2) Assuming confidentiality instead of documenting it

Parties often treat early diligence as “obviously confidential.” If confidentiality isn’t written down, enforcement gets harder and leverage drops fast—especially if information spreads internally or to third parties. Use an NDA first, or include a clearly binding confidentiality section in the LOI; for a plain-language baseline on why reasonable secrecy steps matter (especially for trade secrets), see the USPTO’s trade secret resources.

3) Due diligence with no scope, access rules, or deadline

“Buyer may conduct due diligence” is not a plan. Without scope + timing, diligence expands until the deal drifts or gets re-traded. Fix it by defining (1) a diligence window with an end date, (2) high-level categories to review, (3) access rules (who provides what, and how), and (4) a clear next step when the window ends (move to definitive drafting, request an extension in writing, or walk away).

4) Vague price/consideration mechanics

A headline number is rarely the full story. Misalignment usually hides in structure—deposit/earnest money, adjustments, credits, earn-outs, working-capital concepts, or lease pass-through costs. The fix is not writing a full purchase agreement inside the LOI; it’s stating the structure clearly enough that the definitive agreement isn’t drafted for “two different deals.”

5) Missing conditions precedent (“subject to” items)

Financing, internal approvals, inspections, and third-party consents routinely decide whether a deal can close. If conditions aren’t stated up front, one side can feel “locked in” before key facts are confirmed. Fix it by listing the major “subject to” items and tying them to the timeline (e.g., financing approval by X date; inspection results acceptable to buyer by Y date).

6) Accidental binding language in deal terms

Contract-style verbs in the deal section create risk: “shall purchase,” “agrees to sell,” “will close on.” Non-binding is not a vibe—it’s drafting discipline. Use intent language for deal terms (“intend,” “contemplate,” “subject to definitive agreement”) and reserve firm obligations only for clearly identified binding sections.

Common pitfall: If the LOI reads like a definitive agreement, it can start behaving like one. Keep final commitments, remedies, and performance obligations inside the definitive agreement.

7) No clarity on who pays costs and fees

Inspections, appraisals, environmental reports, legal fees, and advisors add up quickly. Cost ambiguity creates conflict because each side assumes the other is paying. Fix it with a short costs clause that covers the obvious categories and states whether each party bears its own costs or whether any items are reimbursable.

8) Using the wrong template for the scenario

A purchase LOI and a commercial lease LOI fail in different places. The wrong template usually means missing “must-capture” terms you only discover after leverage shifts. Start with the closest scenario template (acquisition vs lease vs employment), then tailor the deal points—don’t force a generic format onto a specialized transaction.

9) Commercial lease economics left “for the lease to decide”

In commercial leasing, headline rent is rarely the whole cost. CAM/NNN, TI allowance, permitted use, options, and assignment/sublease terms determine real economics and flexibility. Fix it by framing these terms at a headline level in the LOI so the lease draft isn’t a surprise factory; if you want a practical orientation to CAM charges, this ICSC overview of CAM is a useful starting point.

Practical takeaway: A strong LOI makes the next phase predictable—clear deadlines, defined diligence, stated economic structure, and a clean binding vs non-binding split—so the definitive agreement process builds on alignment instead of discovering it.

AI vs. Lawyer (What to Choose)

There isn’t one “right” way to prepare a Letter of Intent (LOI) — the best option depends on your risk level, how repeatable the deal is, and how state- or industry-specific your situation is. Attorney pricing varies widely by state, experience, and complexity, so treat any published benchmarks as directional and get a quote for your specific facts. If you want a state-by-state view of typical lawyer hourly rates, see LawPay’s overview: Lawyer Hourly Rate by State.

A practical rule is: use DIY/AI when the downside is manageable, pay for review when you’re repeating the deal or the stakes rise, and invest in drafting when the LOI is a key step in a larger transaction or the liability/negotiation downside is meaningful.

FAQ: Letter of Intent (LOI) (U.S.)

Q: What is a letter of intent (LOI)?
A: A letter of intent (LOI) is a pre-contract document that summarizes the key deal terms and the parties’ intent to keep negotiating toward a definitive agreement. In plain English, it’s a deal snapshot + roadmap that helps both sides stop negotiating in the dark before spending real money on diligence, drafting, or inspections. Most LOIs are non-binding on closing but often include a few binding “process” terms (like confidentiality or exclusivity).

Q: What is a letter of intent format—and what should be included?
A: A solid letter of intent format is more organized, not more “legal.” At minimum, it should identify the parties, describe the transaction, state the headline economics (price/rent/consideration), set a timeline (diligence window + target dates), list key conditions (“subject to” items), and clearly label what is non-binding vs. what is binding. If the reader can’t find the deal + deadline + next step in 20 seconds, the LOI is usually too vague.

Q: Is a letter of intent legally binding in the U.S.?
A: Sometimes—partly, and it depends on the language and the facts. In many deals, the LOI is not meant to be the final contract and does not force either side to close, but courts may still enforce specific binding sections (and in some situations treat the whole document as contract-like if it reads like a final commitment). If the amount is large or the deal is complex, treat “binding vs. non-binding” as a high-risk drafting point and consider legal review.

Q: What is a non-binding letter of intent—and what parts can still be binding?
A: A non-binding letter of intent usually means no obligation to complete the transaction until a definitive agreement is signed. But it can still include binding carve-outs that govern the negotiation stage—most commonly confidentiality (especially if there’s no NDA), exclusivity/no-shop, cost allocation, and sometimes dispute/venue terms. The safest drafting move is a clear global non-binding statement plus an explicit list of binding sections.

Q: Can I use a letter of intent template (LOI template) in Word or as a PDF?
A: Yes—Word is usually best for editing and redlines, and PDF is best for sending a “final” version. A letter of intent template works when you fill in the deal points first (economics, timeline, conditions), then tighten wording, then label binding vs. non-binding clearly. A template is structure, not safety: if you leave blanks vague (price mechanics, diligence scope, deadlines), the LOI won’t prevent later disputes.

Q: What is a letter of intent for business—and what should a business LOI include?
A: A letter of intent for business is used to align on key terms before full contract drafting in deals like acquisitions, mergers, partnerships, joint ventures, distribution, or major services arrangements. It should capture deal structure (asset vs. stock / merger concept), included vs. excluded scope, headline economics, diligence scope + deadline, and closing conditions (financing, approvals, consents). Business LOIs succeed when they control process: who delivers what in diligence, by what date, and what document comes next.

Q: What is a letter of intent to purchase a business (letter of intent to purchase business)—and what terms matter most?
A: A letter of intent to purchase business is an LOI tailored to an acquisition, where the big risk is discovering late that you weren’t negotiating the same deal. The terms that matter most are deal type (asset vs. stock), what’s included/excluded, price structure (including any adjustment or earn-out concept), diligence window + access rules, and key conditions to closing. If you only agree on a number but not the structure, the “re-trade” usually happens after diligence starts—when leverage shifts.

Q: What is a letter of intent real estate—and what should a letter of intent to purchase real estate include?
A: A letter of intent real estate is used to lock business terms before the purchase agreement becomes detailed—especially when inspections, financing, title issues, or timing can kill momentum. A letter of intent to purchase real estate should identify the property, state price and deposit/earnest money concept, set inspection/diligence deadlines, outline financing timing, and note key conditions (title/survey, zoning/feasibility where relevant). Real estate LOIs work best when they control the calendar so the deal doesn’t drift.

Q: What is a letter of intent to lease commercial property (and what is a sample letter of intent to lease commercial property)?
A: A letter of intent to lease commercial property is the “business terms sheet” that prevents the lease draft from becoming a surprise factory. It should cover base rent, term, escalations, operating costs (CAM/NNN concept), TI allowance/build-out concept, delivery condition, permitted use, options, and assignment/sublease concept. A sample letter of intent to lease commercial property is usually short and scannable—but it still makes the real economics measurable, not “to be negotiated later.”

Q: How do you write a letter of intent for a job application—and should you use a template?
A: A job-application letter of intent is closer to a structured pitch than a negotiated deal memo: role you want, why you fit, and what you’ll deliver. Use a template if it helps you stay organized, but keep it specific—mirror the posting, cite measurable achievements, and end with a clear ask (interview / next step). If it reads generic, it fails—AI-written or not.

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A strong letter of intent (LOI) protects your time, your budget, and your leverage. When the key terms are written down, the timeline is real, and the binding vs. non-binding split is explicit, you reduce “endless back-and-forth” and move faster toward the definitive agreement.

Use the scenario section above to choose the closest template (business, real estate, employment), then pair it with a simple diligence plan so the other side can’t stall on “missing details.” A clean LOI plus a clear diligence window turns negotiation into a trackable process instead of scattered emails.

Start with the Letter of Intent (LOI) template from our library, or generate a first draft with AI Lawyer and then customize it to your deal points (economics, deadlines, conditions, and any binding carve-outs). If the stakes are high—large dollar amounts, regulatory exposure, multi-state risk, or a sophisticated counterparty—consider having a U.S. lawyer review the LOI before you sign.

Sources and References

Core contract framing in this guide (what an LOI is, how “agreement in principle” differs from a definitive contract, and why wording matters) draws on Cornell Law School’s Legal Information Institute overview of contracts and related contract basics.

Discussion of when writing matters (especially in real estate-heavy contexts) follows the general concept explained in Cornell LII’s overview of the statute of frauds, which is a useful orientation for why certain agreements are commonly treated as “writing-sensitive.”

Electronic signature and record-validity references rely on the federal ESIGN framework, as summarized in the statutory text of 15 U.S.C. § 7001 (Electronic Signatures in Global and National Commerce Act).

Investment and fundraising context (where LOIs sometimes overlap with term-sheet style economics) is informed by the SEC’s small-business overview of exempt offerings and common pathways such as Regulation D.

Merger and acquisition “regulatory awareness” references use public guidance that helps parties understand how agencies think about competitive effects, including the FTC’s Merger Guidelines resource hub.

Confidentiality and trade secret protection concepts (why NDAs/confidentiality clauses matter during diligence) are supported by the USPTO’s overview materials on trade secret policy and protection.

Practical “what people typically validate” orientation for smaller acquisitions/franchises is informed by the SBA’s buying guide, including SBA guidance on buying an existing business.

Employment-law and hiring/practices caution references (where relevant to offer/promotion LOIs) use baseline public guidance from the EEOC, including the EEOC’s guidance and resources library.

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