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Denition Objectives Biding on parties Models for business negotiations

DEFINITION A Letter of Intent is essentially a collection of key points of an agreement between two parties that are negotiating a contract; in this respect a Letter of Intent is simply the agreement signed prior to the nal contract. In certain negotiations, the parties may wish to come to a preliminary agreement, sometimes called an agreement to agree, which may or not be enforceable, depending on the circumstances and applicable law. The Letter of Intent is also known as Commitment Letter or Memorandum of Understanding although the latter is wider and is used for complex operations, especially in countries like China.

OBJECTIVES Among the purposes of a Letter of Intent are: The statement that the parties are currently negotiating. Clarifying the key points of an operation for the convenience of the parties. Assess the interest of the other party to carry out the business. Collect the advances that occur in each of the negotiations. Provides guarantees if the deal collapses during negotiation.

BIDING ON THE PARTIES Without a certain formality, the Letter of Intent is meant to acknowledge the will of the parties to carry out in the near future all the steps necessary to perform a contract that gives way to a transaction in international business. It involves a reciprocal wills statement, without binding effect, but with high ethical value to the parties who sign. However, some Letters of Intent, contain provisions that are binding, such as non-disclosure and noncompete agreements.

MODELS FOR BUSINESS NEGOTIATIONS The more used Letters of Intent in business negotiations are those related to Sale, Distribution and Joint Venture Contracts. You can nd models of these Letters in the following links: Letter of Intent for Sale Agreement. Letter of Intent for Distribution Agreement. Letter of Intent for Joint Venture Agreement.