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 Colorado, a Letter of Intent (LOI) is generally considered a preliminary, non-binding document that outlines the basic terms and understanding between parties contemplating a significant transaction, such as a merger, acquisition, joint venture, or real estate deal. The purpose of an LOI is to signal the intent to negotiate in good faith and to lay the groundwork for further negotiations. It typically includes terms that are agreed upon in principle, subject to further negotiation and due diligence. While the LOI itself is not usually legally binding in terms of the obligation to complete the transaction, certain provisions within it, such as confidentiality and nondisclosure clauses, can be enforceable. Parties should be clear about which parts of the LOI are intended to be binding. It is advisable for parties to consult with an attorney to ensure that their rights and interests are adequately protected when drafting or signing an LOI.