What is a LOI
A letter of intent (LOI or LoI, and sometimes capitalized as Letter of Intent in legal writing, but only when referring to a specific document under discussion) is a document outlining one or more agreements between two or more parties before the agreements are finalized. The concept is similar to a heads of agreement, term sheet or memorandum of understanding. Such outlined agreements may be mergers and acquisitions transaction agreements, joint venture agreements, real property lease agreements and several other categories of agreements that may govern material transactions.
Basically as a client or party in a negotiation, when you’re going to ask for commodity or product you will issue such letter and send it to us. For example all of our Gas Oil & Petroleum Products clients will send us such letter via email or any other official accepted communication channels.
Purposes of a LOI
Common purposes of a LOI are
- To allow parties to sketch out fundamental terms quickly before expending substantial resources on negotiating definitive agreements, finalizing due diligence, pursuing third-party approvals and other matters
- To declare officially that the parties are currently negotiating, as in a merger or joint venture proposal
- For the purpose of providing safeguards in case a deal collapses during negotiation
- In order to verify certain issues regarding payments made for someone else (e.g., credit card payments)
Potential downsides to using an LOI may include
- The parties may engage in protracted negotiations on only a subset of a deal’s terms
- Might increase diversity of Management time and focus.
- Alternative opportunities may be missed and markets may move against the parties during negotiations.
- Parties may reduce their lack of a workable deal framework into an LOI, with a hope of making progress later
- Public disclosure obligations may be inadvertently triggered
- The risk of leaks, exacerbated by the desire of some to tout the LOI to the world, or shop it to other parties
We have attached several template of Letter of Intent letter so you can understand it better.
The Letter of Intent displayed above simply it starts with:
- Introduction about who is issuing the letter.
- Outline the summary of commodity
- Commodity name (ex. Bright Sulphur)
- There is a section for specification of the fuel.
- Buyer preferred procedures.
- Sign and sealed.
That is pretty much it.
Attached is also another Letter of Intent in format of Docx which you can download and modify.
You can download the template at Letter Of Intent Template by Savand Bros fo Oil Gas & Petroleum Products as well.