What is the purpose of a Letter of Intent (LOI)?

The purpose of a Letter of Intent (LOI) is primarily to gauge the commitment of the parties involved to pursue a future contractual relationship. An LOI typically outlines the preliminary terms and conditions that the parties hope to agree upon in a more formal contract in the future. It serves as a tool for expressing interest and intent rather than as a definitive binding agreement.

LOIs may detail the key points such as price, timeline, and other essential aspects of the future deal, allowing both parties to align their expectations before engaging in more extensive negotiations. While an LOI may include provisions that are binding, such as confidentiality or exclusivity clauses, the overall document is not intended to serve as a final contract, which differentiates it from other options.

Other options suggest functions that are outside the scope of an LOI's primary purpose. For instance, while it may outline intentions, it does not represent a binding contract between the parties, nor does it finalize agreement details or transfer ownership of property. Instead, it lays the groundwork for discussions and potentially subsequent formal agreements.