What Is The Purpose Of Letter Of Intent (LOI)?



The purpose of the letter of intent (LOI) is to write your interest in applying for a particular job, scholarship or admission into the specific company, institute or college.

An intent letter also referred to as LOI may be required by schools, colleges, companies, institutes or organizations from the applicants interested to apply for admissions, scholarships, jobs or wish to sign agreements for a particular project.

Candidates write the letter of intent specifically describing their interest for a particular position.

Purpose of Letter Of Intent for admission | Letter Of Intent purpose for scholarship

A letter of intent (LOI) in the field of education is also referred to as the statement of purpose (SOP). The intent letter (LOI) is normally required by the colleges and schools from the candidates seeking admissions or scholarships.

Intent Letter basically consists of an essay that briefly describes the intentions of the candidate about why they wish to apply for a particular course or a scholarship.

Purpose of Letter Of Intent in Business

The main reason for writing a letter of intent (LOI) (also the Letter of Understanding (LOU) or Memorandum of Understanding (MOU) in business is to show interest towards the project and to record the minutes of meeting in documented manner to assist the concerned parties in beginning the discussions on a business contract or project.

In such cases, the letter of intent (LOI) would perform the job of identifying the main business arrangements or contractual agreements that would lay the foundation for a deal closing with a contract.

Tips for writing a Letter Of Intent (LOI)

The choice between binding and non-binding letters of intent in business: Although the letters of intent (LOI) are meant to be of a non-binding nature, failure to mention this within an intent letter could result in it becoming binding on the parties to it.

It then can be enforced by the court of law. Besides, if the manner in which a letter of intent (LOI) is worded points to a conflict of purpose, then to it could become binding on the concerned parties.

Privacy and confidentiality issues in writing a letter of intent: If private and confidential information is likely to be exchanged between parties in preliminary discussions on a business contract or project, then they should execute a non-disclosure agreement prior to beginning discussions.

This agreement would then bind the concerned parties even with a non-binding letter of intent. It could be placed along with the letter of intent in the form of an exhibit.

Keep it brief: Do not try to be too thorough and include too many details in the letter of intent (LOI). Include just the right amount of details to get the discussions started.

Avoid statements such as “will ensure reasonable effort to come to an agreement and have a contract drawn up as soon as possible”, “agree to negotiate”, or “in good faith” as these could result in a court disregarding the non-binding nature of the letter of intent and make it binding on all parties.

An example of Non-binding and binding letter of intent (LOI) is quoted below;

“This letter of intent is not intended to create, nor do you or we presently have any binding legal obligation whatever … [H]owever, it is our intention, and we understand, your intention immediately to proceed in good faith in the negotiation of such binding definitive agreement.” Schwanbeck v. Federal-Mogul Corp., 412 Mass 703 (1992).

In the case mentioned above, the court was of the opinion that an obligation was created when the word ‘however’ was used along with ‘proceed in good faith’ and this obligation was not dependent on the broad-based non-binding clause of the letter of intent (LOI).

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