What document formalizes ongoing discussions and records agreements before a legally enforceable contract is drawn up?

The letter of intent serves as a critical preliminary document that outlines the intentions and agreements reached by parties before finalizing a legally binding contract. It captures the key terms and conditions, paving the way for further negotiations. This document is particularly important in situations where parties want to establish a mutual understanding of responsibilities, timelines, and objectives while still leaving room for adjustments as more detailed discussions unfold.

One of its main functions is to signify the serious intentions of the parties involved, demonstrating their commitment to reaching a formal agreement. By articulating the main points of negotiation, a letter of intent acts as a roadmap for developing a more comprehensive contract, ensuring that both sides are aligned on major issues from the outset. This can help minimize misunderstandings and serves as a point of reference for future discussions.

In contrast, other documents mentioned play different roles in the negotiation process. A memorandum of understanding, while similar in function, tends to imply a stronger, more formal agreement compared to a letter of intent. A non-disclosure agreement focuses specifically on confidentiality and the protection of sensitive information rather than outlining negotiation terms. Lastly, a service level agreement is created to define specific service expectations between parties but is typically established after the intent to contract has been agreed upon and tends to address performance criteria