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 New Jersey, a Letter of Intent (LOI) is typically a non-binding document that outlines the preliminary understanding between parties who are considering a major transaction, such as a merger, acquisition, joint venture, or real estate deal. The LOI serves to summarize the main points of a proposed agreement before the final contract is drafted. It usually includes key terms such as the structure of the deal, price, and timeline, but it also emphasizes that these terms are subject to further negotiation and due diligence. Importantly, an LOI often contains confidentiality and nondisclosure clauses to protect the sensitive information exchanged during negotiations. While the LOI itself is generally not legally binding in terms of the obligation to complete the transaction, certain provisions, like confidentiality, exclusivity, and governing law, can be enforceable. Parties should be cautious in drafting LOIs to avoid inadvertently creating binding obligations, and it is advisable to consult with an attorney to ensure that the LOI accurately reflects their intentions and protects their interests.