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 Delaware, a Letter of Intent (LOI) is typically a non-binding document that outlines the preliminary understanding between parties who are considering entering into a formal agreement, such as a merger, acquisition, joint venture, or real estate transaction. The LOI serves to identify the basic terms and conditions upon which the parties agree in principle, subject to further negotiation and due diligence. While the LOI itself generally does not create a binding contract for the transaction, certain provisions within it, such as confidentiality and nondisclosure clauses, can be binding if clearly stated. Delaware courts will look at the language of the LOI to determine the intent of the parties and whether any part of the LOI was meant to be binding. It is important for parties to explicitly state which, if any, provisions are intended to be legally binding. Parties should also be aware that actions taken after signing an LOI, such as beginning performance based on the terms outlined, could potentially lead to a binding obligation under Delaware's legal principles of contract formation.