How to streamline negotiations: 8 steps to create a comprehensive LOI template

A well-drafted letter of intent (LOI) template can provide the clarity you need, offering a structured way to agree on essential points before finalising a formal contract. Whether you're working through a complex commercial deal, joint venture, or asset purchase, a letter of intent can help reduce misunderstandings, save valuable time, and minimise risks for all parties involved. Follow this checklist curated by our legal experts to create your own comprehensive LOI template.

Why use a letter of intent (LOI) template?

An LOI template provides a structured and efficient way to document the key terms and intentions of a potential agreement. Rather than starting from scratch, a professionally designed template serves as a clear framework to guide discussions, streamline the negotiation process, and reduce costs by minimising the need for lengthy negotiations.  

Here's how a well-designed LOI template can benefit your business:

• Ensure parties are aligned from the outset: using an LOI template prompts you to include essential details - such as the parties involved, key terms, and timelines -ensuring all critical aspects of the agreement are addressed and agreed upon upfront. This clarifies the fundamental points and provides a framework for both parties to begin negotiations on the same page.

• Save time and resources: drafting an LOI from scratch can be time-consuming, especially for complex transactions. Using an LOI template simplifies the process, reducing the time and effort spent creating one.

• Minimise errors and enhance consistency: an LOI template is designed to cover the standard elements of an LOI, making it less likely for you to overlook crucial terms or conditions. This ensures your letters of intent are consistent, comprehensive and accurate.

• Customise for specific transactions: while an LOI template provides a strong foundation, you can adapt it to include special terms tailored to the unique needs of a deal. This flexibility is invaluable when agreeing on terms for a potential contract.

You can find out more about the benefits of using an LOI template by reading this comprehensive guide.

Checklist for creating an LOI template

Use this checklist to guide you in drafting an effective LOI template. A good LOI template will help ensure that you agree upon the key terms at the outset of your most important ventures and transactions.

1. Identify the parties involved and their roles in the upcoming agreement

The first step is to identify the parties involved. Clearly outline the full names of each party and provide any relevant identifiers (e.g. registered company numbers and addresses).

It’s also good practice to specify the roles and responsibilities of each party. For example, one party may act as the "Buyer" and the other as the "Seller," or as the "Service Provider" and the "Client." By outlining each party's roles, you can set expectations early to establish a solid foundation for the upcoming agreement.

2. Define the purpose of the agreement between the parties

Next, define the purpose of the agreement. This section should clearly define the intention of the LOI, whether it’s to outline terms for a potential acquisition, partnership, or a supply of goods/service arrangement. You should also clarify that the document is primarily not intended to be legally binding, except for any specific agreed-upon provisions, such as confidentiality obligations or exclusivity. For more information about these terms, read our comprehensive guide,

3. Outline the key terms

An LOI template should always include a section where the key terms of the agreement will be set out. This includes the fundamental aspects of the transaction/project/venture, such as the type of deal and the obligations of each party.

Tip tip: Ensure the commercial terms are succinct, avoiding unnecessary complexity or over-detailing. Its crucial to strike a fine balance to ensure the letter is comprehensive enough to mitigate confusion when one of the parties draws up the formal contract.

4. Specify any financial terms

If there are financial terms relating to the deal, ensure that you set these terms out clearly in the LOI template. This could include the price, payment structure, and timelines. A clear example might be: “The purchase price shall be £50,000, payable in two instalments: £25,000 upon the effective date of the formal agreement and £25,000 three months thereafter.”

5. Set a timeline and define any milestones/deadlines

Setting a timeline is another essential component. If one party aims to finalise the deal as soon as possible while the other needs more time, if this is discovered at this early stage, a middle ground can be reached more efficiently with clear timelines. Define milestones and deadlines, such as the expected date for signing the formal agreement or the deadline for completing specific responsibilities.

6. Include confidentiality provisions

Confidentiality provisions are an invaluable tool to protect sensitive information during the early stages of negotiation. Your LOI template should include clauses that prohibit either party from disclosing the agreed terms, or any proprietary information shared during negotiations, without prior written consent. For added protection, you can also include an obligation requiring the return or destruction of sensitive information if the deal does not go ahead.

If you have agreed that the relationship of the parties will be exclusive, you may also wish to include an exclusivity clause in your LOI template. An exclusivity clause prevents either party from engaging in similar negotiations with third parties for a specified period. If you wish to include this, you should ensure that the duration and scope of exclusivity are clearly defined to avoid misunderstandings and ambiguity.

7. Define the next steps and/or any documents to follow

The letter of intent should also outline the next steps in the process. Specify what actions need to be taken after the letter is signed, such as conducting due diligence, drafting the final agreement, or scheduling follow-up negotiations. Including a process for finalising the agreement, such as obtaining board or stakeholder approvals, helps maintain momentum and keep the deal on track.

8. Use a reliable template

Finally, if you want to ensure that steps 1-7 are covered, use a reliable LOI template to save time and ensure compliance. Our lawyer-crafted and maintained LOI template includes questions and prompts that help you include the essential terms in your letter. All of our templates contain pre-populated fields, making the contracting process more efficient so that you can focus on other aspects of the deal.

Final thoughts

By following this checklist and using a comprehensive LOI template, we can make protracted negotiations a thing of the past. By using an LOI template, you can quickly align on key terms of an upcoming agreement, expedite the formal contract process, and set the stage for a successful business relationship.

Streamline your contract process today by using Docue's template. Once you've created the document, you can send for e-signature, and then once signed, your completed document effortlessly in Docue Drive.

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