Letter of intent template

A letter of intent (LoI) is a document that sets out the key terms a buyer and seller have agreed in principle at the early stages of a proposed transaction – often a share or business purchase.

It acts as a roadmap for the detailed legal documents to come, helping both sides identify where they are aligned and where further negotiation may be needed. Typical topics covered include:

• the buyer and seller(s)
• whether the buyer will purchase shares or assets
• the proposed purchase price, how it will be calculated and paid and when will it be paid, including any deferred consideration or earnout arrangements
• any conditions to proceeding, such as due diligence, board or shareholder approvals, regulatory or third party consents
• key terms of the sale and purchase agreement
• indicative timetable, such as due diligence period, drafting of legal documents and anticipated signing or completion timeline

Although most of the letter is not legally binding, it plays an important commercial role. It helps focus negotiations and allows the buyer to begin due diligence with greater confidence. The parties may agree that some sections should be legally binding such as:

• Confidentiality of the term sheet (if not already covered by a separate NDA)
• Exclusivity, either in the LoI itself or a separate exclusivity agreement

PaperRock’s LoI templates are designed specifically for UK share and business purchase transactions and include detailed guidance, so you can confidently document agreed terms from the start.

A letter of intent (LoI) typically sets out the main commercial terms agreed between a buyer and seller before finalising a business or share purchase transaction. It is not a detailed contract and is usually not legally-binding, but it does provide a clear summary of what the parties expect the deal to involve.

While each LoI will differ depending on the transaction, most include:

• the identity of the buyer and seller
• the proposed purchase price and structure (e.g. full or partial share purchase)
• payment terms, including any deferred elements or earn-outs
• a summary of conditions to completion (such as due diligence, regulatory approvals or financing)
• expected timeline or target dates for signing and completion
• any exclusivity period
• a confidentiality clause to protect sensitive information
• a statement on which provisions of the LoI will be legally binding
  

Including these elements helps the parties align expectations early, spot potential deal-breakers and streamline the process of drafting the full legal documents.

PaperRock’s letter of intent templates include all the standard elements, with practical guidance on how to tailor each section for your deal.

Most of a letter of intent (LoI) is not legally binding, but certain parts can be, depending on how the document is drafted.

Under English law, a letter of intent is usually intended to be a record of agreed principles, not a binding contract to proceed. The key terms – such as the proposed purchase price or deal structure – are typically expressed as “subject to contract”, meaning they are not enforceable.

However, some provisions can be binding if clearly stated, such as:

• confidentiality clauses — to protect sensitive information during due diligence
• exclusivity clauses — preventing the seller from negotiating with others for a fixed period
• costs and conduct provisions — for example, who pays what if the deal falls through
  

To avoid confusion, it’s essential to state in the document which parts are intended to be binding and which are not.

PaperRock’s letter of intent templates include clear guidance and pre-drafted clauses to ensure the legal status of each section is properly defined.

Yes, a letter of intent (LoI) should be signed by all parties, especially those who will be bound by any legally-binding clauses such as confidentiality or exclusivity.

Although much of a letter of intent is not legally binding, signing it confirms that the parties have reached agreement in principle on the key commercial terms. It also helps demonstrate mutual commitment and gives the buyer greater confidence when starting due diligence.

Key points:

• signing is essential if any provisions (like confidentiality or exclusivity) are meant to be legally binding
• the letter does not usually need to be witnessed, unless it is being executed as a deed  –  which is uncommon for a standard LoI
• each party should keep a signed copy for reference during the negotiation and drafting of the main transaction documents

There’s no fixed length for a letter of intent (LoI) — it should be long enough to clearly set out the key terms, but short enough to remain practical at this early stage of the deal.

Most LoIs are between 2 and 5 pages, depending on the complexity of the transaction and how much detail the parties want to include. A simple share purchase may only need a few paragraphs outlining price, structure and key conditions. A more involved deal might justify a longer document with additional clauses covering earnout consideration, pre-contract reorganisation of the target company or business, third party consents and due diligence expectations.

What matters most is clarity:

• use plain unambiguous language to record the main commercial terms
• avoid unnecessary legal detail better left for the formal agreements
• clearly state which parts (if any) are legally binding
  

PaperRock’s templates are designed to strike the right balance  – detailed enough to give clarity and structure, without overwhelming you with legal complexity.

Heads of Terms and Letters of Intent (LoIs) serve a similar purpose: to set out the main points of a proposed deal before a binding contract is signed. The terms are often used interchangeably, but there are subtle differences in how they’re used.

Heads of Terms are more common in business and company sales, joint ventures, and commercial agreements. They focus on outlining key commercial terms clearly and simply, helping parties stay aligned before the final agreement is drafted.

Letters of Intent are typically used in more formal or strategic deals—such as mergers or acquisitions—where one party wants to express serious intent or request exclusivity. LoIs may include some legally binding clauses (like confidentiality or break fees), so it’s important to be clear about what is and isn’t binding.

Both formats help reduce misunderstandings, structure negotiations, and save time in the long run. Choosing between them depends on the type of transaction and how formal or binding you want the initial document to be.

Read our full guide to Heads of Terms.