Letter of Intent (LOI): How to Write, Sign, and Send One

Key Takeaways: A letter of intent (LOI) is a document that outlines the preliminary terms of a deal before a binding contract is drafted. It signals serious intent, sets expectations, and accelerates negotiations. Most LOIs are non-binding, but some clauses (like confidentiality) are typically enforceable. This guide covers when to use an LOI, what to include, and how to sign it electronically.

What Is a Letter of Intent?

A letter of intent (LOI) — also called a memorandum of understanding (MOU) or term sheet — is a written document that outlines the key terms of a proposed deal before the parties negotiate a final, binding contract.

Think of it as a handshake in writing. It says: "We're both serious about this deal, and here's what we've roughly agreed to. Now let's work out the details."

LOIs are commonly used in:

• Business acquisitions and mergers — the buyer outlines proposed purchase terms
• Real estate transactions — purchase price, contingencies, closing timeline
• Business partnerships — roles, equity splits, contribution commitments
• Job offers — salary, start date, benefits outline before the formal employment agreement
• Commercial leases — rent, term, tenant improvement allowances
• Investment terms — valuation, investment amount, equity percentage (often called a "term sheet")
• University applications — student's intent to enroll

Is a Letter of Intent Legally Binding?

The short answer: it depends on how you write it.

Most LOIs are intentionally non-binding — they outline proposed terms without creating legal obligations. However:

• Certain clauses can be binding even in a non-binding LOI. These typically include:

  • Confidentiality — both parties agree not to disclose deal terms
  • Exclusivity (no-shop clause) — the seller agrees not to negotiate with other parties for a specified period
  • Expenses — each party bears their own costs
  • Governing law — which jurisdiction's laws apply to the LOI itself

• An LOI can become binding if it's written without clear non-binding language. If the LOI says "the parties agree to..." without explicitly stating it's non-binding, a court could interpret it as a contract.

Best practice: Include an explicit statement: "This Letter of Intent is non-binding and does not create any legal obligation to enter into a definitive agreement, except for the provisions of Sections [X] (Confidentiality) and [Y] (Exclusivity), which are binding."

How to Write a Letter of Intent: Section by Section

1. Opening Statement

State the purpose and identify the parties.

This Letter of Intent ("LOI") outlines the proposed terms under which [Buyer/Partner/Employer] intends to [acquire/partner with/employ] [Seller/Partner/Candidate]. This LOI is intended to serve as a basis for negotiation of a definitive agreement.

2. Transaction Overview

Describe the proposed deal in 2-3 sentences.

[Buyer] proposes to acquire 100% of the outstanding equity interests of [Target Company] for a total consideration of $[Amount], subject to customary due diligence and the negotiation of a definitive purchase agreement.

3. Key Terms

For business acquisitions:

• Purchase price and payment structure (cash, stock, earn-out)
• Assets and liabilities included/excluded
• Due diligence period and access provisions
• Key employee retention expectations
• Non-compete provisions for the seller

For real estate:

• Purchase price and deposit amount
• Inspection and due diligence period
• Financing contingencies
• Closing date
• Included fixtures and exclusions

For employment:

• Position title and reporting structure
• Compensation (base salary, bonus structure, equity)
• Benefits summary
• Start date
• At-will status or contract term

4. Due Diligence

Specify the period and scope:

Buyer shall have [30/60/90] days from the date of this LOI to conduct due diligence, including review of financial statements, contracts, intellectual property, employment records, and any other materials reasonably requested. Seller agrees to provide timely access to all requested information.

5. Confidentiality (Binding)

Both parties agree to maintain the confidentiality of the transaction, the terms of this LOI, and all information shared during due diligence. This obligation survives termination of this LOI for a period of [2] years.

6. Exclusivity / No-Shop (Binding)

For a period of [60] days from the date of this LOI, Seller agrees not to solicit, negotiate, or enter into discussions with any third party regarding a sale, merger, or similar transaction involving the Company.

7. Non-Binding Disclaimer

Except for the provisions regarding Confidentiality (Section 5) and Exclusivity (Section 6), this LOI is non-binding and does not constitute a commitment by either party to enter into a definitive agreement. Either party may terminate discussions at any time without liability.

8. Expiration

This LOI shall expire if not accepted by [Date]. Acceptance is indicated by the counter-signature of an authorized representative of [receiving party].

9. Signature Block

Both parties sign to acknowledge the proposed terms.

LOI vs. Other Pre-Contract Documents

How to Sign and Send an LOI Electronically

An LOI can and should be signed electronically — there's no legal requirement for a handwritten signature on an LOI in any major jurisdiction.

Using ZiaSign:

1. Create your LOI in Word or Google Docs, then export to PDF
2. Upload to ZiaSign and add signature fields for both parties
3. Send to the other party — they receive a link to review and counter-sign
4. Both parties receive a signed PDF with a timestamped audit trail
5. Store the signed LOI in ZiaSign's document archive for reference during definitive agreement negotiations

Why e-signing is ideal for LOIs:

• Speed — LOIs lose value the longer they take to execute. E-signing closes the loop in hours, not days
• Audit trail — proves exactly when each party signed, which matters for exclusivity period start dates
• Version control — ZiaSign stores the exact signed version, preventing "I thought we agreed to different terms" disputes