A letter of intent is a legal document which outlines an agreement parties in accordance of a particular business deal or transaction. The letter of intent does not fortify the transaction, but simply signifies an agreement before the purchase or deal is finalized.
The concept of a letter of intent is similar to an Asset Purchase Agreement, which outlines the intention of a buyer and notifies the seller that the goods are to be reserved before the purchase is actually fortified.
The fundamental purpose of a letter of intent is to clarify the key points of a transaction for the convenience of the parties involved. Typically, letters of intent are reserved for complicated purchases or agreements. For example, when an aeronautical company seeks to buy a fleet of airplanes from a manufacturer, the parties will draw up an aircraft letter of intent to stipulate the finances and delivery dates involved in the transaction. In addition, the aircraft letter of intent will officially declare that the agreeing parties are under negotiation and that the deal is not finalized.