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When to Use a Letter of Intent

A letter of intent is a common document typically used to propose a business transaction, or as a cover letter for a job or college application. The non-binding document details a prospective transaction or activity between two or more parties. The letter of intent comes before an official, final contract or agreement and is used to help attorneys draft official agreements.

By using a letter of intent, terms and conditions are planned, and important points like payment and employment contracts are covered. This ensures all parties understand the intentions of the impending action before it goes through.

If you are making an important proposal, it may be a good idea to use a letter of intent because it confirms the parties’ understanding of the deal and clarifies their intentions before the transaction occurs, allowing time and room to make changes. Letters of intent can also include binding conditions that can be held up in court. Learn more about when letters of intent are binding here.

Letters of intent should be used in business transactions before a lot of money and time are spent on drafting legal documents and other proceedings. The letter of intent will show confirmation of the agreement from all parties involved and will let you know that you can continue with the process.

When is it used?

Letters of intent can be used in a variety of circumstances. The following are some of the most common.

Business

  • Letter of Intent to Purchase Property: This lets the property seller know the interest and terms of the potential buyer. This document should be used before the negotiation process to inform the seller of the purchaser’s intentions.
  • Lease Letter of Intent: Given from a tenant to a potential landlord, this document explains their interest in the rental as well as outlines the terms and conditions of the lease agreement. It can be used as part of the application process.
  • Letter of Intent for Business Venture: When one person is interested in embarking into a business venture with another, this outlines the interests of the parties as well as the terms and conditions.
  • Letter of Intent to Purchase an Asset: Used for the negotiation of a potential sale, this document outlines terms between the purchaser and seller. It is typically used for the purchase of a business or a property and demonstrates good faith interest from both parties to continue with the purchase.
  • Letter of Intent to Sue: A potential plaintiff would use this as a notification to another party that they are planning on suing. It precedes the legal proceedings and usually includes a section about the possibility of settling out of court.
  • Letter of Intent Between a Consultant and a Client: This is used by a contractor or a client when they are negotiating the terms and conditions of a potential business arrangement. It comes before the official agreement and outlines how the services will be rendered.
  • Letter of Intent to Pay: Given to a creditor, this letter of intent outlines the debtor’s intentions to pay off a debt. The letter includes terms and payment details as well as interest paid. It should be used whenever settling a debt with a creditor.

Personal

  • Educational Letter of Intent: Used as part of the college application process, this letter is written by a student to a prospective school. It details the student’s interest in the school and their academic and personal achievements. These are often required by universities and graduate programs.
  • Employment Letter of Intent: Provided to a potential employer, along with a resume, this letter of intent serves as a sort of cover letter. It describes the potential employee’s interest in the company, career aspirations and goals.

A letter of intent should be used whenever you need to outline your terms and conditions and describe your intent, or whenever you need to document your interest in a purchase or venture. It is wise to use a letter of intent before any business transaction or before entering into any contract. Letters of intent can help with contract negotiations and ensure all parties thoroughly understand one another’s intentions.