Define: Letter of Intent (LOI)
A Letter of Intent (LOI) is a written document sent to a bidder or counterparty confirming acceptance of their offer and signaling intent to proceed with agreed work before a final contract is signed. It sets out preliminary terms, allows early mobilisation, and bridges the gap between negotiation and execution of the formal agreement.
Legal accuracy standard set & glossary spot-checked by Imad Mohammed Nazar , Skadden-trained M&A lawyer, Legal Engineer at GenieAI
What Letter of Intent (LOI) Means in a Contract
A Letter of Intent (LOI) is a written communication issued by one party, typically a buyer, employer, or client, to a bidder or supplier, confirming that their proposal or tender has been accepted and that the parties intend to proceed toward a formal agreement. It is not usually the final contract itself but a signal of serious intent, often used to allow work to begin, secure resources, or lock in pricing while the complete agreement is finalised.
In commercial practice, an LOI bridges the gap between negotiation and execution. It might instruct a contractor to begin preparatory work on a construction project, or confirm to a supplier that an order will follow once terms are agreed. Because it sits in a grey area between negotiation and binding commitment, the LOI's legal status depends heavily on its wording.
Parties should understand that calling a document a.
Relevant Circumstances
- When a buyer signals acceptance of a bid before signing the full contract
- If preparatory work can begin under cover of an LOI
- Where exclusivity, break fees or confidentiality bind parties pre-contract