What Is Contained in a Letter of Intent?

A letter of intent can be used for many purposes, from selling a house to entering into a business investment. The overall intent of the letter is to serve as a precursor to a contract, and in many cases, the letter of intent is legally binding. The points contained in a letter of intent should be clear and concise, and are meant to spell out the details of the agreement that the two parties are entering into.

Involved Parties

• A letter of intent typically signifies two or more parties entering into a written contract or agreement. The parties may be individuals, groups or businesses, and should be stated by name in the beginning of the letter (for example, "John Smith" or "MHS Accounting"). At the end of the letter, each individual must sign her name, either as herself or as representation for the company entering the agreement.

Legally Binding

• A letter of intent may be binding or nonbinding, and either way this should be stated explicitly so as to avoid legal consequences should something go wrong with the agreement. If the parties agree to do so, occasionally only certain sections outlined in the letter can be legally binding.

Terms and Conditions

• The terms and conditions under which the agreement is held are summarized in the letter of intent. This includes explaining which party is responsible for what action in the agreement, and what the consequences will be should that party fail to fulfill his end of the agreement.

Dates

• In many cases, a timeline and/or specific dates are included in the letter of intent. For example, if the agreement is about a new project, the letter of intent will likely mention the due date of completion for that project. Other more specific dates might be included, particularly if the agreement involves several phases.

Costs and Payments

• Financial information is an important component of a letter of intent. Any money that is exchanged between parties or from outside sources must be documented, including the amount, who is paying it, who is receiving it and when. The details of the origins of the money involved (for example, personal, invested, fundraised) are often also included in the letter.