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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.

These documents are similar and are often used interchangeably. While they vary a bit from each other, they are used for the same purpose which is to show intent and an agreement to agree. Most are considered "nonbinding" unless the wording is included to make it binding.

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