A letter of intent (LOI) is a document that summarizes the understanding between two or more parties regarding a potential transaction. LOIs are commonly used when the parties are contemplating a merger-acquisition, joint venture, real estate purchase or lease, or other significant transaction. An LOI outlines the general terms of the deal, often with the stated understandings that the specific terms of any deal are subject to further negotiation, and that the parties are not obligated to complete a transaction. Because the parties will likely be disclosing confidential information—including the fact that they are having such discussions—the LOI should usually include confidentiality and nondisclosure terms.

In Alabama, a Letter of Intent (LOI) is generally considered a non-binding document that outlines the preliminary understanding between parties who are negotiating a potential transaction, such as a merger, acquisition, joint venture, or real estate deal. The LOI serves to identify the basic terms and conditions of the proposed agreement, facilitating further negotiations. It typically includes provisions that the final agreement is contingent upon the negotiation of more detailed terms and that neither party is legally obligated to complete the transaction based solely on the LOI. However, certain clauses within the LOI, such as confidentiality and nondisclosure terms, can be binding if explicitly stated. It is important for parties to clearly indicate which parts of the LOI are intended to be binding and which are not. Alabama courts will generally honor the intentions of the parties as expressed in the LOI, provided that the language is clear and unequivocal. As with any legal document, it is advisable to consult with an attorney to ensure that the LOI accurately reflects the parties' intentions and protects their interests.