… you are about to negotiate an important business and wish to set some ground rules for the negotiations
… you want to secure your interest in an important business and want to restrict your potential partner from negotiating with others
… you have already reached an understanding on the main business terms and want to lay them down in writing
A letter of intent or “LoI” is a document outlining the understandings between two or more parties on how they will conduct negotiations and what they will negotiate.
The parties express their interest in entering into a business relationship that will be governed by a final, yet-to-be-negotiated agreement. A major advantage of using LoIs is that they enable the parties to define the procedural rules applicable to the negotiations (for example exclusivity, timeframe or confidentiality) in a binding manner, whereby the most important conditions for the intended agreement are described in an indicative manner.
The definition of a content-related and formal framework for the negotiations accelerates the process until a binding agreement is signed.
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