Deal papers and endings
Letter of intent
The paper that records the shape of a deal before anybody drafts the real contract. It sets out the main commercial terms, the timetable and the conditions each side expects, so that the negotiation can proceed on a shared understanding. Most of it is deliberately not binding — but a few parts usually are, typically confidentiality, exclusivity and who pays costs, and the document says which is which rather than leaving it to be worked out later.
- In the catalogue
- Deal papers and endings
- Where it can live
- Any of the 184 governing laws
Who uses one
- Parties agreeing the outline of an acquisition, an investment or a large contract.
- Buyers and sellers who want exclusivity while diligence runs.
- Businesses agreeing a partnership before lawyers are engaged.
What you are deciding
- The main commercial terms as agreed so far
- Which parts are binding and which are not, said explicitly
- Whether there is an exclusivity period, and how long
- What confidentiality applies
- Who pays their own costs
- The timetable and the conditions to be met
- What ends the letter
Blanks you leave stay blank and wait in the room. Nothing is filled in from a guess.
The sections a draft usually has
- 1The parties and the proposed transaction
- 2Key commercial terms
- 3Conditions
- 4Timetable
- 5Exclusivity
- 6Confidentiality
- 7Costs
- 8Binding and non-binding parts
- 9Termination of the letter
A general outline, not a required one. What turns up in a draft follows what you described. A contract is written in the order a contract is read.
What people call it
The names this kind of paper goes by. They are here because people search for them. They also filter the catalogue. They are not a wordlist the door matches. At the composer you describe the deal in your own words instead.
- letter of intent
- loi
- heads of terms
- letter of understanding
- indicative offer letter
- heads of agreement
Questions people ask
- Is a letter of intent binding?
- Usually most of it is not, and the named parts are. Whether a particular letter creates obligations depends on its wording and on local contract law, not on the title, so the binding section is written carefully.
- What is an exclusivity period?
- A stretch of time during which one side agrees not to negotiate with anybody else. It is one of the terms almost always drafted as binding, because it is the point of signing early.
- How is a letter of intent different from heads of terms?
- Largely by regional habit — the two describe the same document in different markets. Both record the deal shape before the definitive contract exists.
General answers about the document. Not advice about your situation. Not written about any one country.
Where it lives
A contract names the legal system it is governed by. That is a separate decision from which paper it is. You pick it at the door, from any of the 184 units in Governing law, including England and Wales, Delaware, California and New York.
You do not start from this page. Describe the deal in one sentence at the door. Read the draft back in plain language, in the order a contract is read.
Start it at the door →Related kinds