A Letter of intent, sometimes known as a memorandum of understanding, is a non-legally binding letter, which states the key terms of a contract under discussion and includes a target signing date. It can be used as a roadmap for a number of different deals - eg a major services or outsourcing agreement, sale of a business or a licence agreement. It can set out a range of matters which need to be completed or secured prior to signing, such as a due diligence exercise or consent from the board of directors. It helps to smooth the way for further negotiations and a final agreement. Although it's not legally binding in terms of requiring a final agreement, a letter of intent can contain certain legally binding clauses dealing with matters such as confidentiality and employee poaching.
There are a wide range of contracts which often need to be used in the course of business. Ensure that you only use professionally written agreements to protect your business interests.
Before you enter into a formally binding contract, a Letter of intent (or Heads of terms) can help to set out the key terms of the potential agreement. Meanwhile, a Non-disclosure agreement can ensure that confidential information discussed in the course of negotiations remains confidential. If a service is being provided between two businesses, a Services agreement should set out the terms. When it comes to business expansion, a Distribution agreement, Sales agency agreement or a Subcontracting agreement can help you retain some degree of control. At the end of a contract, you'll need to give appropriate notice in a Contract termination letter - or you may decide to transfer the benefits of a contract to another business using a Letter assigning a contract.