What Is a Letter of Intent?
A letter of intent (LOI) is a document that outlines the preliminary terms of a proposed agreement between two or more parties. It signals that the parties are serious about moving forward and establishes a framework for negotiation before committing to a full contract.
LOIs go by many names depending on the context: memorandum of understanding (MOU), term sheet, expression of interest, or statement of intent. Regardless of the label, the purpose is the same: put the key terms in writing before investing significant time and money in a definitive agreement.
The critical thing to understand about LOIs is that they exist in a legal gray area. They are typically non-binding, but poorly drafted LOIs can create enforceable obligations. This is why the language matters more than most people realize.
When You Need a Letter of Intent
LOIs are used across four major contexts, each with different conventions and expectations:
- Employment: A candidate signals interest in a position, or an employer outlines a preliminary offer before the formal employment agreement
- Real Estate: A buyer communicates intent to purchase property and proposes initial terms like price, contingencies, and closing timeline
- Business Acquisition: A buyer proposes terms for acquiring a company, including purchase price, deal structure, due diligence period, and exclusivity
- Graduate School: An applicant communicates intent to attend a program, explaining their research interests and academic fit
Each type follows a different structure, but all share core elements: identification of the parties, statement of intent, key terms, and a timeline.
Core Sections Every LOI Needs
Before diving into specific templates, here are the sections that appear in virtually every LOI:
1. Header and Date
Formal letterhead with the date, recipient's name, title, and address. This establishes the document as a professional communication between specific parties.
2. Opening Statement of Intent
A clear declaration of what the LOI is about. This is not the place for ambiguity.
This Letter of Intent sets forth the principal terms upon which
[Party A] intends to [purchase/employ/enter into an agreement with]
[Party B], subject to the conditions described herein.
3. Material Terms
The specific terms being proposed. These vary by LOI type but always include the most important deal points. In a real estate LOI, this means price, contingencies, and closing date. In an employment LOI, it means title, compensation, and start date.
4. Binding vs. Non-Binding Provisions
This section is critical and frequently mishandled. It must explicitly state which parts of the LOI create legal obligations (binding) and which are merely proposals (non-binding).
Non-Binding Provisions: Sections 1 through 5 of this LOI are
non-binding and are intended solely to facilitate negotiations
toward a Definitive Agreement.
Binding Provisions: Sections 6 (Confidentiality), 7 (Exclusivity),
and 8 (Expenses) are binding and enforceable obligations of the parties.
5. Conditions and Contingencies
What must happen before the deal closes. This includes due diligence, financing approval, regulatory clearance, board approval, or satisfactory inspection results.
6. Timeline and Expiration
How long the LOI remains open for acceptance, when due diligence must be completed, and the target date for executing the definitive agreement.
7. Confidentiality
Whether the existence and terms of the LOI must be kept confidential. This is almost always a binding provision.
8. Signatures
Signature blocks for all parties. Even in a non-binding LOI, signatures signal good faith commitment to the proposed terms.
Employment Letter of Intent Template
An employment LOI serves two purposes: it lets the candidate express interest before a specific role opens, or it lets the employer outline a preliminary offer before the formal contract.
Key Sections for Employment LOIs
Position and Reporting Structure: Title, department, reporting line, and location. Be specific—vague role descriptions cause problems later.
Compensation: Base salary, bonus structure (target percentage, metrics), equity or stock options, and signing bonus if applicable. Specify whether figures are annual and when they take effect.
Benefits Overview: Health insurance, retirement contributions, PTO policy, and any unique benefits. You do not need to list every benefit in detail—reference the company's benefits package.
Start Date and Term: Proposed start date and whether the employment is at-will or for a fixed term.
Contingencies: Background check, reference verification, non-compete review, proof of work authorization.
Sample Employment LOI Structure
LETTER OF INTENT - EMPLOYMENT
Date: [Date]
To: [Candidate Name]
From: [Company Name]
Dear [Candidate],
We are pleased to outline the following terms for your potential
employment as [Title] at [Company]:
1. POSITION
Title: [Senior Director of Engineering]
Department: [Product Development]
Reports to: [VP of Engineering]
Location: [San Francisco, CA / Remote]
2. COMPENSATION
Base Salary: $[185,000] per year
Annual Bonus: [15]% target, based on [company and individual performance]
Equity: [10,000] stock options, vesting over [4] years with [1]-year cliff
Signing Bonus: $[15,000], repayable if employment terminates within [12] months
3. BENEFITS
Per company standard benefits package, including health/dental/vision
insurance, 401(k) with [4]% match, and [20] days PTO.
4. START DATE
On or about [Date], subject to completion of contingencies.
5. CONTINGENCIES
This offer is contingent upon satisfactory completion of:
- Background and reference checks
- Verification of employment eligibility
- Review of any existing non-compete agreements
6. AT-WILL EMPLOYMENT
Employment will be at-will and may be terminated by either party
at any time, with or without cause.
7. NON-BINDING
This LOI is non-binding and does not create an obligation for
either party. A formal employment agreement will supersede this letter.
[Signature blocks]
Common Employment LOI Mistakes
- Omitting at-will language: Without it, a court may interpret the LOI as creating a fixed-term employment contract
- Vague compensation terms: "Competitive bonus" means nothing. Specify the target percentage and metrics
- Missing contingency language: If you skip contingencies, the candidate may argue the offer was unconditional
- Forgetting non-compete review: If the candidate has an existing non-compete, you need to know before they start
Real Estate Letter of Intent Template
In real estate, the LOI (sometimes called a letter of interest or expression of interest) establishes proposed terms before the buyer and seller engage attorneys to draft a purchase agreement. It saves both sides legal fees if the basic terms are not acceptable.
Key Sections for Real Estate LOIs
Property Description: Legal address, parcel number, and brief description of the property. Be precise enough that there is no ambiguity about which property is involved.
Purchase Price and Deposit: Proposed price, earnest money deposit amount, and deposit timeline. Specify whether the deposit is refundable during the contingency period.
Financing: Cash or financed. If financed, the loan amount, type (conventional, SBA, etc.), and expected terms.
Due Diligence Period: How long the buyer has to inspect the property, review environmental reports, examine title, and assess financials (for income-producing properties).
Contingencies: Financing, inspection, appraisal, environmental review, zoning confirmation, and any tenant-related conditions.
Closing Timeline: Target closing date and who selects the escrow or title company.
Sample Real Estate LOI Structure
LETTER OF INTENT - REAL ESTATE PURCHASE
Date: [Date]
Property: [Address, City, State ZIP]
Seller: [Seller Name/Entity]
Buyer: [Buyer Name/Entity]
1. PURCHASE PRICE
$[2,500,000], subject to adjustments based on due diligence findings.
2. EARNEST MONEY DEPOSIT
$[50,000] within [5] business days of executing the Purchase Agreement.
Deposit is fully refundable during the due diligence period.
3. FINANCING
Buyer intends to finance [75]% of the purchase price through
[conventional commercial lending]. This LOI is contingent upon
Buyer obtaining financing on terms acceptable to Buyer.
4. DUE DILIGENCE PERIOD
[45] calendar days from execution of the Purchase Agreement.
During this period, Buyer may inspect the property, review all
leases, financial records, environmental reports, and title.
Buyer may terminate for any reason during this period and
receive a full refund of the earnest money deposit.
5. CLOSING
Closing to occur within [30] days after expiration of the
due diligence period. Seller to convey marketable fee simple
title by general warranty deed.
6. CONTINGENCIES
- Satisfactory property inspection
- Clean Phase I environmental assessment
- Title review with no unacceptable encumbrances
- Financing approval
- [Estoppel certificates from all tenants]
7. EXPENSES
Each party bears its own expenses. Transfer taxes split [50/50].
Seller pays existing assessments; Buyer pays post-closing assessments.
8. EXCLUSIVITY
Seller agrees not to solicit, negotiate, or accept offers from
other parties for [30] days from the date of this LOI.
9. CONFIDENTIALITY
Both parties agree to keep the terms of this LOI confidential.
10. NON-BINDING
Except for Sections 8 (Exclusivity) and 9 (Confidentiality),
this LOI is non-binding and subject to execution of a mutually
acceptable Purchase Agreement.
[Signature blocks]
Common Real Estate LOI Mistakes
- No exclusivity period: Without it, the seller can use your LOI to drive up bids from other buyers
- Vague due diligence scope: Specify what you are allowed to inspect and what records the seller must provide
- Missing earnest money refund language: Clarify when the deposit becomes non-refundable (typically after due diligence)
- Forgetting environmental contingencies: Phase I assessments can reveal costly remediation obligations
- No "subject to financing" clause: If financing falls through, you need an exit without forfeiting your deposit
Business Acquisition Letter of Intent Template
M&A LOIs are the most complex type. They establish the framework for acquiring a company, and the terms negotiated here directly shape the definitive purchase agreement. Getting the LOI right saves weeks of negotiation later.
Key Sections for Business Acquisition LOIs
Transaction Structure: Asset purchase vs. stock purchase vs. merger. This has significant tax and liability implications.
Purchase Price and Payment: Total consideration, how it is paid (cash, stock, earnest money, seller note), and any price adjustments (working capital, earn-out provisions).
Due Diligence: Scope, duration, and access requirements. The buyer needs access to financials, contracts, employees, customers, IP, and litigation history.
Representations and Warranties: What each party guarantees about themselves and the business. Seller represents the business is as described; buyer represents they have the authority and funds to close.
Employee Matters: Which employees transfer, on what terms, and whether key employees must sign employment agreements as a condition of closing.
Non-Compete and Non-Solicitation: Whether the seller agrees not to compete with the business post-closing.
Exclusivity (No-Shop): The seller agrees not to entertain other offers during the negotiation period.
Sample Business Acquisition LOI Structure
LETTER OF INTENT - BUSINESS ACQUISITION
Date: [Date]
Buyer: [Acquiring Company]
Seller: [Target Company / Shareholders]
Target: [Business Name]
1. TRANSACTION STRUCTURE
Buyer proposes to acquire [100]% of the outstanding equity interests
of [Target] through a [stock/asset] purchase.
2. PURCHASE PRICE
Total consideration: $[5,000,000]
- Cash at closing: $[3,500,000]
- Seller note: $[1,000,000] payable over [3] years at [5]% interest
- Earn-out: Up to $[500,000] based on [revenue targets for 24 months
post-closing]
Purchase price subject to customary working capital adjustment
based on a target of $[400,000].
3. DUE DILIGENCE
Buyer shall have [60] days to conduct due diligence, including
review of:
- Financial statements (3 years audited, current interim)
- Material contracts and customer agreements
- Employee records and benefit plans
- Intellectual property portfolio
- Pending and threatened litigation
- Tax returns and compliance history
- Environmental compliance
- Insurance policies and claims history
Seller shall provide reasonable access to records, personnel,
and facilities during normal business hours.
4. KEY EMPLOYEES
Closing is contingent upon [CEO/CTO/Key Person] executing
employment agreements with terms acceptable to Buyer.
5. NON-COMPETE
Seller agrees to a non-compete covering [geographic scope]
for [3] years post-closing.
6. REPRESENTATIONS AND WARRANTIES
Customary representations and warranties for a transaction
of this type, with a survival period of [18] months
and a basket/cap structure to be negotiated.
7. EXCLUSIVITY
For [90] days from the date of this LOI, Seller shall not
directly or indirectly solicit, encourage, or negotiate
any acquisition proposal from any third party.
8. CONFIDENTIALITY
Both parties agree to maintain strict confidentiality
regarding the existence and terms of this LOI.
9. EXPENSES
Each party bears its own expenses, including legal,
accounting, and advisory fees.
10. GOVERNING LAW
[State] law.
11. NON-BINDING
Except for Sections 7, 8, 9, and 10, this LOI is
non-binding and subject to execution of a Definitive
Purchase Agreement.
[Signature blocks]
Common Business Acquisition LOI Mistakes
- No working capital adjustment: Without it, the seller can drain cash from the business before closing
- Vague earn-out terms: Define exactly how earn-out targets are measured, who controls the business during the earn-out period, and what happens during disputes
- Too-short exclusivity period: 30 days is rarely enough for M&A due diligence. Ask for 60-90 days
- Missing key employee conditions: If the business depends on specific people, their retention must be a closing condition
- Overlooking rep and warranty survival: Negotiate this in the LOI or you will spend weeks on it in the purchase agreement
Graduate School Letter of Intent Template
A graduate school LOI is fundamentally different from the business types. It is a personal statement of academic purpose, not a negotiation document. Some programs call it a statement of purpose, personal statement, or letter of intent interchangeably.
Key Sections for Graduate School LOIs
Introduction and Program Identification: Which program you are applying to and what degree you seek.
Academic Background: Relevant coursework, research experience, GPA highlights, and academic achievements. Focus on what is relevant to the program.
Research Interests: Specific topics, methodologies, or questions you want to explore. Name faculty members whose work aligns with your interests.
Professional Experience: Work or internship experience that connects to your academic goals. This is especially important for MBA, law, and professional programs.
Why This Program: What specifically about this program attracted you. Be specific. Mention labs, centers, courses, faculty, or unique program features.
Career Goals: What you plan to do with the degree and how the program prepares you for it.
Sample Graduate School LOI Structure
[Your Name]
[Your Address]
[Date]
[Admissions Committee / Department Name]
[University Name]
[Address]
Dear Members of the Admissions Committee,
I am writing to express my strong interest in the [Master of Science
in Computer Science] program at [University Name], with a focus on
[machine learning and natural language processing].
[ACADEMIC BACKGROUND - 1-2 paragraphs]
During my undergraduate studies in [Computer Science] at [University],
I completed coursework in [specific relevant courses] and maintained
a [GPA] in my major. My senior thesis on [topic] under the supervision
of Professor [Name] introduced me to [relevant research area].
[RESEARCH INTERESTS - 1-2 paragraphs]
I am particularly drawn to your program because of the work being
conducted by Professor [Name] in [specific research area]. Their
recent publication on [topic] aligns closely with my interest in
[specific question or methodology].
[PROFESSIONAL EXPERIENCE - 1 paragraph]
Since graduating, I have worked as a [role] at [company], where I
[specific relevant accomplishments]. This experience confirmed my
desire to pursue advanced study in [field].
[WHY THIS PROGRAM - 1 paragraph]
Beyond the research opportunities, your program's [specific feature—
interdisciplinary focus, industry partnerships, lab resources]
makes it the ideal environment for my academic and professional goals.
[CAREER GOALS - 1 paragraph]
Upon completing the program, I intend to [career goal]. The training
and mentorship available through [program name] will prepare me to
[specific contribution to the field].
Thank you for considering my application. I look forward to the
opportunity to contribute to and learn from the [Department] community.
Sincerely,
[Your Name]
Common Graduate School LOI Mistakes
- Being too generic: "Your program is renowned" could apply to any school. Name specific faculty, labs, or courses
- Listing accomplishments without connecting them: Every achievement you mention should link to why you are a fit for this specific program
- Ignoring the program's research focus: If the program specializes in computational biology and your interests are in pure theory, explain the connection or reconsider applying
- Too long or too short: Most programs expect 1-2 pages (500-1000 words). Respect the guidelines
Binding vs. Non-Binding: The Most Important Distinction
The single most consequential aspect of any LOI is whether it creates legal obligations. Courts have repeatedly held that the label on the document does not determine its legal effect. A document titled "Non-Binding Letter of Intent" can be enforced as a contract if it contains all material terms and lacks explicit non-binding language.
What Makes an LOI Binding
An LOI becomes binding when:
- It contains all material terms of the agreement (price, parties, subject matter, timeline)
- There is no explicit reservation of the right not to be bound
- The parties act as if bound by performing obligations described in the LOI
- Context suggests finality: Partial performance, detailed terms, and absence of references to a future agreement all weigh toward enforceability
Safe Non-Binding Language
Include these elements to keep your LOI non-binding:
This Letter of Intent is not intended to create, nor shall it be
construed as creating, any binding obligation on either party,
except as specifically set forth in Sections [X] (Confidentiality)
and [Y] (Exclusivity).
The parties acknowledge that they will not be bound unless and
until a Definitive Agreement has been negotiated, executed, and
delivered by both parties.
Either party may terminate discussions at any time, for any reason,
without liability.
Provisions That Are Typically Binding
Even in non-binding LOIs, these clauses are usually enforceable:
- Confidentiality: Both parties keep deal terms private
- Exclusivity / No-Shop: Seller does not entertain other offers for a defined period
- Expenses: Each party bears its own costs
- Governing Law: Which jurisdiction's law applies to disputes about the LOI itself
Negotiating LOIs with Track Changes
LOIs are negotiation documents. The first draft is rarely the final version. In business acquisitions and real estate transactions, the LOI may go through 3-5 rounds of revision before both parties sign.
The Negotiation Workflow
Round 1: Buyer sends initial LOI
Round 2: Seller's attorney redlines terms (price, exclusivity, timeline)
Round 3: Buyer responds to redlines with counter-proposals
Round 4: Parties negotiate remaining open items
Round 5: Final LOI executed by both parties
Each round produces a new version of the document. Without track changes, it becomes impossible to see what changed between versions, who proposed which modifications, and what was accepted or rejected.
Why Track Changes Matter for LOIs
When negotiating an LOI, you need to:
- See exactly what the counterparty changed in your draft
- Preserve the original language alongside proposed modifications
- Add comments explaining why you reject or accept specific changes
- Maintain a clear audit trail showing the evolution of terms
This is where document editing tools with real track changes become essential. Email markup ("I changed Section 3") is unreliable. PDF annotations are not editable. Only native Word track changes give both parties a clear, authoritative record of the negotiation.
Using DocMods for LOI Negotiation
DocMods generates LOIs from templates and tracks every modification through the negotiation process. Here is how the workflow looks:
from docxagent import DocxClient
client = DocxClient()
# Generate an LOI from a template
doc_id = client.upload("loi_template.docx")
# AI reviews the counterparty's redlines and suggests responses
result = client.edit(
doc_id,
instructions="""
Review the counterparty's proposed changes to the LOI.
For each change:
1. Accept reasonable modifications (standard market terms)
2. Reject changes that materially weaken our position
3. Propose alternative language where we can meet in the middle
4. Add comments explaining our reasoning for each decision
Use track changes for all modifications.
"""
)
# Download the negotiated version
client.download(doc_id, "loi_v2_response.docx")
Every edit is captured as a tracked change. When the counterparty opens the document, they see precisely what you accepted, rejected, and counter-proposed, with comments explaining your reasoning.
Version Control Through Negotiation
Each round of negotiation creates a new document version. DocMods maintains the full version history, so you can:
- Compare any two versions to see what changed
- Revert to a previous version if negotiations go sideways
- Generate a clean final version once all changes are accepted
- Maintain a complete audit trail of the negotiation
This is especially valuable in M&A transactions, where the LOI negotiation can span weeks and involve multiple attorneys on each side.
Tips for Writing a Strong LOI
Be Specific, Not Vague
Every material term should include a concrete number, date, or condition. "Competitive compensation" is meaningless. "$185,000 base salary with a 15% target bonus" is actionable.
Know What Is and Is Not Negotiable
Before sending your LOI, identify your walk-away points. What terms are non-negotiable? What are you flexible on? This prevents wasted negotiation cycles.
Keep It Concise
An LOI is not a definitive agreement. It captures the essential terms. Details like dispute resolution procedures, representations schedules, and indemnification baskets belong in the final contract.
Use Clear Section Headers
Label your sections explicitly. "Purchase Price," "Due Diligence Period," "Non-Binding Provisions." This makes it easy for the counterparty to navigate and respond to specific sections.
Always Include a Termination Mechanism
Specify when the LOI expires and how either party can terminate. Without this, you may find yourself in a zombie negotiation with no clear way out.
Have an Attorney Review It
Even though LOIs are preliminary, poorly drafted ones create real legal exposure. An attorney who specializes in your transaction type (real estate, M&A, employment) can spot issues that save significant problems later.
How DocMods Handles LOI Creation and Editing
DocMods supports the full LOI lifecycle:
- Template Generation: Start from an LOI template or have AI generate one based on your specifications. Describe the deal terms in plain language and get a properly formatted LOI
- AI Review: Upload a counterparty's LOI and have AI analyze it against your standards, flagging aggressive terms and suggesting alternative language
- Track Changes Editing: Every modification is recorded as a native Word tracked change, visible in any Word-compatible application
- Version History: Every revision is stored. Compare versions, revert changes, and maintain a complete audit trail
- Comment Annotations: Add comments explaining your reasoning for accepting, rejecting, or modifying terms
- Export: Download any version as a standard .docx file, fully compatible with Microsoft Word, Google Docs, and other editors
The key differentiator: DocMods produces real OOXML track changes, not annotations or highlights. When your counterparty opens the document in Word, they see standard Accept/Reject controls for every modification.
Summary
A well-drafted LOI saves time, reduces legal costs, and establishes clear expectations before the parties commit to a definitive agreement. Whether you are negotiating a job offer, a property purchase, a business acquisition, or applying to graduate school, using the right template and following best practices protects your interests and moves the deal forward.
The most important rules:
- Be explicit about binding vs. non-binding language to avoid unintended obligations
- Include all material terms so both parties understand what they are agreeing to in principle
- Use track changes for negotiation so every revision is documented and attributable
- Keep it concise but complete; the LOI is a roadmap, not the final destination
