What does a "letter of intent" typically outline?

A "letter of intent" primarily serves as a preliminary document that outlines the understanding between parties who intend to enter into a formal agreement in the future. It is important because it establishes the key terms and intentions before the detailed contract is drafted, providing a roadmap for what the parties plan to negotiate. This document often helps clarify mutual interests and can set the stage for further negotiations. Although it can include elements like basic terms and conditions, it is not a legally binding contract and usually does not contain final terms.

By focusing on the initial intentions of the parties, a letter of intent can facilitate the negotiation process and help ensure both sides are aligned on important aspects before committing to a formal contract. This clarity can prevent misunderstandings and miscommunications later in the process, making it a valuable tool in contract management.