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.
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.
Read definitionPurchase 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.
Read definitionContract 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.
Read definitionNon-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.
Read definitionExplore related across the knowledge graph
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