Letter of Intent

Glossary

Banking

Letter of Intent

A letter of intent is issued before a formal contract is signed relating to a project. It expresses the intention of a party to pursue contract negotiations but where prior works are requested before the contract is signed. Letters of intent can be binding and amount in effect to a proto-contract, or a less certain and non-binding statement of intent (a.k.a. comfort letter). In construction industry as an example,, a letter of intent broadly confirms to the recipient, say a contractor, that a final contract will be forthcoming or that there is a desire to move to contract. If the project fails to go ahead after a letter of intent has been issued but before contracts have been signed, the recipient of the letter will have their costs repaid, such as procurement of materials, site preparation, or costs of labour.

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