Letter of Intent
A Letter of Intent (LOI) is a document signed between two parties when they wish to commence formal negotiations.
Last updated October 23, 2025
Suitable for Australia
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Is a letter of intent a legal contract?
Is a letter of intent a legal contract?
No, a letter of intent is not usually a legal contract. It's a preliminary document setting out the framework for negotiations, not a finished agreement, so most terms aren't meant to create binding obligations.
Specific clauses, like confidentiality or exclusivity, can still bind you if the wording says so clearly. Whether it counts as a contract comes down to what it says, not its title.
Is a letter of intent legally binding in Australia?
Is a letter of intent legally binding in Australia?
Generally, no, a letter of intent is not legally binding in Australia, except for specific clauses marked as binding, like confidentiality or exclusivity.
Courts look at what the parties actually intended, not just what the document is called, so one written like a finished contract can end up binding even without that label. Keep non-binding parts clearly marked as non-binding if that's what you want.
Does a letter of intent need to be signed?
Does a letter of intent need to be signed?
Yes, a letter of intent needs to be signed by both parties to function as intended, even though most of its terms aren't legally binding.
Signing shows both sides genuinely agreed to the framework it sets out, which matters if a dispute later arises about what was actually discussed. An unsigned letter of intent carries far less weight as evidence of what the parties intended.
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Frequently asked questions
Do I need a letter of intent for a business purchase or acquisition?
keyboard_arrow_upCan I use a letter of intent for any type of negotiation?
keyboard_arrow_upHow does a letter of intent protect my confidential information?
keyboard_arrow_upWhat are the main risks of using a letter of intent?
keyboard_arrow_upWhat happens if negotiations break down after signing a letter of intent?
keyboard_arrow_upWhat's the most common mistake businesses make when using a letter of intent?
keyboard_arrow_upHow does a letter of intent differ from a memorandum of understanding?
keyboard_arrow_upWhat's the difference between a letter of intent and a heads of agreement?
keyboard_arrow_upHow do you write a letter of intent?
keyboard_arrow_upWhat steps should I take after signing a letter of intent?
keyboard_arrow_upHow long does it take to create a letter of intent?
keyboard_arrow_upHow much does it cost to get a letter of intent, template versus a lawyer?
keyboard_arrow_upView Sample Letter of Intent
The Legal Risk Score of a Letter of Intent Template is Low
Our legal team have marked this document as low risk considering:
- The document outlines that the terms within the Letter of Intent are not intended to be legally binding except where explicitly stated, which implies there is a risk that commitments made during this stage might not be enforceable.
- Each party bears its own costs related to the negotiation and drafting of the Proposed Agreement, regardless of whether the agreement proceeds, which could result in financial loss if the agreement does not materialize.
- The Letter of Intent includes a clause that allows either party to terminate negotiations at any time without explanation, which introduces uncertainty and the potential for abrupt cessation of discussions without recourse.
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