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Contracts & Pricing

Letter of Intent (LOI)

Also known as: LOI

A letter of intent (LOI) is a document that declares one party's intention to enter into a contract or transaction with another, often outlining key terms before the final agreement.

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An LOI is typically issued by a buyer to a supplier to confirm serious intent to proceed, allowing preparatory work, ordering of long-lead materials or mobilisation to begin while the full contract is finalised. It usually summarises the headline commercial terms and any conditions that must be met.

Like an MOU, an LOI may be wholly or partly binding depending on how it is drafted, and specific provisions such as confidentiality or reimbursement of costs are often made binding even when the overall document is not. In procurement it bridges the gap between award decision and signed contract, but it should never be treated as a substitute for the final agreement.

Frequently asked questions

What is a letter of intent?
A letter of intent declares one party's intention to enter into a contract, often summarising key terms, so preparatory work can begin while the final agreement is completed.
What is the difference between an LOI and an MOU?
An LOI usually expresses one party's intent to contract with another and often precedes a bilateral deal, while an MOU records the mutual intentions of two or more parties to cooperate. Both can be binding or non-binding depending on drafting.

Related terms

Memorandum of Understanding (MOU)

A memorandum of understanding (MOU) is a document that records the shared intentions of two or more parties to work together, usually before a binding contract is signed.

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Purchase Order (PO)

A purchase order (PO) is the official document a buyer sends to a supplier to confirm the order of goods or services at agreed prices and terms.

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Contract Management

Contract management is the process of creating, executing, tracking and renewing supplier contracts to ensure both sides meet their obligations and value is realised.

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Non-Disclosure Agreement (NDA)

A non-disclosure agreement (NDA) is a contract in which parties agree to keep specified confidential information private and not disclose it to others.

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Explore related across the knowledge graph

GuideContract managementThe discipline that turns a negotiated agreement into delivered value — keeping contracts used, monitored and renewed on time.TemplateContract Register TemplateAn Excel register to track every supplier contract, its value and renewal dates, with automatic expiry alerts.GlossaryBank GuaranteeA bank guarantee is a promise from a bank to pay a beneficiary a stated amount if the bank's customer fails to meet a defined obligation.GlossaryCall-Off OrderA call-off order is an individual order placed against an existing framework agreement or blanket purchase order to draw down agreed goods or services as needed.GlossaryContract AwardContract award is the formal decision to appoint a chosen supplier and enter into a contract after a sourcing or tender process concludes.GlossaryContract ComplianceContract compliance is the degree to which purchasing actually follows the prices, terms and conditions set out in agreed contracts.GlossaryContract Lifecycle Management (CLM)Contract lifecycle management (CLM) is the structured management of a contract through every stage, from drafting and negotiation to renewal or expiry.GlossaryContract NegotiationContract negotiation is the process of discussing and agreeing the price, terms and conditions of a contract before both parties sign.GlossaryContract RenewalContract renewal is the process of reviewing and extending a contract as it approaches expiry, either on the same terms or on renegotiated ones.GlossaryContract VariationA contract variation is a formal change to the agreed scope, price, timeline or terms of an existing contract, made with both parties' consent.GlossaryCost-plus ContractA cost-plus contract pays the supplier for its allowable costs plus an additional agreed amount for profit, rather than a single fixed price.GlossaryDiscount StructureA discount structure is the set of rules a supplier uses to reduce list prices, based on factors such as volume, order value, payment timing or customer tier.GlossaryEvergreen ContractAn evergreen contract is an agreement that automatically renews at the end of each term unless one party gives notice to cancel or change it.GlossaryFixed-price ContractA fixed-price contract sets a single agreed price for defined goods or services regardless of the supplier's actual costs to deliver them.GlossaryForce MajeureForce majeure is a contract clause that excuses a party from its obligations when an extraordinary event beyond its control prevents performance.
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Operating model · diagram

  1. 01

    AI-first software

    AI-first procurement software for long-tail spend

  2. 02

    Live marketplace

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  3. 03

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    Human sourcing and support

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