Letter of Intent

Letter of Intent : When organisations interested to apply for any schemes etc. the donor agencies at times ask organisations to send Letter of Intent (LoI) or Expression of Interest (EoI).

Letter of Intent is a sort of expression of Interest. Normally this is not a definite contract or agreement. Once an individual or organisation expresses interest to apply for a grant or any other activity first they need to send the Letter of Intent if the concerned organisation asks for it. After going through this if the agency concerned wish to further proceed on the mutual agreement, they will be in touch for further information if needed.

A letter of intent may be presented by one party to another party and subsequently negotiated before execution (or signature.) If carefully negotiated, a LOI may serve to protect both parties to a transaction. For example, a seller of a business may incorporate what’s known as a ‘no solicitation’ provision which would prevent the buyer from subsequently hiring an employee of the seller’s business should the two parties not be able to close the transaction. On the other hand, a LOI may protect the buyer of a business by imposing a condition to complete the transaction on their part if financing the deal is not obtained.

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The most common purposes of an LOI are:

To clarify the key points of a complex transaction for the convenience of the parties
• To declare officially that the parties are currently negotiating, as in a merger or joint venture proposal
• To provide safeguards in case a deal collapses during negotiation
• To verify certain issues regarding payments done for someone else e.g. credit card payments

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An LOI may also be referred to as a term sheet or discussion sheet. The terms reflect different styles (an LOI is typically written in letter form and focuses on the parties’ intentions; a term sheet skips formalities and lists deal terms in a bullet-point summary), but usually do not indicate any difference under law. A contract, by contrast, is a legal document governed by contract law. Furthermore, there is also a specific difference between a letter of intent and a memorandum of understanding (MOU); an LOI outlines the intent of one party toward another with regard to an agreement, and may only be signed by the party expressing that intent, whereas an MOU must be signed by all parties to be a valid outline of an agreement. Nevertheless, LOIs are fairly often incorrectly referred to as MOUs and vice versa. (wikipedia)

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