letter of intent (LOI)

Definition

Interim agreement that summarizes the main points of a proposed deal, or confirms that a certain course of action is going to be taken. Normally, it does not constitute a definitive contract but signifies a genuine interest in reaching the final agreement subject to due diligence, additional information, or fulfillment of certain conditions. The language used in writing a letter of intent is of vital importance, and determines whether it is only an expression of intent or an enforceable undertaking. Also called 'memorandum of understanding' or 'precontract'.