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A Letter of Intent is a written document that outlines a preliminary agreement between two parties regarding the terms of a potential purchase or other transaction. The two parties can settle on certain terms while agreeing to continue to negotiate the other terms and details of the transaction before actually signing a purchase agreement.

This agreement is most often used in transactions involving a purchase. Sometimes two parties will know that they want to do a business deal together, but they aren't ready to sign an actual agreement. For example, they may agree that one party will sell his or her business for a certain price, but they do not yet agree on who will take on certain liabilities of the business. The parties can sign this document to show each other a good faith intention to work out a deal. It can also help parties get on the same page as to what they expect from the purchase.

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