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 South Dakota, a Letter of Intent (LOI) is generally recognized as a preliminary agreement that outlines the basic terms and conditions under which a transaction could occur between parties. It is not typically a binding contract, but rather a tool to facilitate further negotiations. The LOI may include terms such as the structure of the transaction, purchase price, and due diligence requirements, and it often stipulates that the final agreement is contingent upon the negotiation and execution of a definitive agreement. Confidentiality and nondisclosure terms are commonly included to protect sensitive information shared during negotiations. While the LOI itself is usually non-binding regarding the main transaction, certain clauses, like confidentiality, exclusivity, and governing law, can be legally binding. It is important for parties to clearly state their intentions within the LOI and to seek the advice of an attorney to ensure that their interests are adequately protected and that they understand the implications of the LOI.