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27 Mar

The Concept and Importance of Letter Of Intent Or LOI

Letter of Intent

The Letter of Intent or LoI, ais a document that outlines the agreement between two parties or more involved in a financial venture before coming to a final agreement. The LOI may vary from one agreement to another such as Asset Purchase Agreements, Lease Agreements, Share Purchase Agreements and overall Agreements which are required for the finalization of a large prospective deal.

Letter of Intent: Keys of Conception

The LoI is drafted to look like a contract but is not a binding agreement between the parties involved. However there are a few binding clauses in the agreement including clauses concerning non-disclosure agreements or the covenant to manage the negotiation in good faith. It may also take the shape of a formal contract if its intention is to formally bind the parties and can be presented as such to a court of law.

Basic Focal Point of LoI

Usually the letter of intent is presented by one party to the other for the clarification of points and to negotiates before the finalization and completion of signatures. The document can actually serve as a protection for the clients involved in the deal. It acts as a safeguard during negotiations of concerning the involved deals.

LoI: Objectives and Goals

The most common objectives of the Letter of Intent is to clarify the tenets or points of a financial deal or transaction. It also serves as a means to officially declare that the parties are on the terms of negotiation n a deal. It safeguards the deals from detoriating during the negotiation phase. The major function of the letter is to clarify the methods and details concerned with payments and credits dto third parties. It also ensures that the deal is carried out according to the rules and norms set by the state. The LoI is also considered as a term sheet which deals with the discussions carried out during the negotiation of any deal.

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