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A Memorandum of Understanding (MoU) is a legal document describing a bilateral or multilateral agreement between parties. It expresses a convergence of will between the parties, indicating an intended common line of action and may not imply a legal commitment.
A letter of intent or LOI is a document outlining an agreement between two or more parties before the agreement is finalized.
LOIs resemble written contracts, but are usually not binding upon the parties in their entirety. Many LOIs, however, contain provisions that are binding, such as non-disclosure agreements, a covenant to negotiate in good faith, or a "stand-still" or "no-shop" provision promising exclusive rights to negotiate. A LOI may also be interpreted as binding the parties if it too closely resembles a formal contract.
The purposes of an LOI may be:
to clarify the key points of a complex transaction for the convenience of the parties
to declare officially that the parties are currently negotiating, as in a merger or joint venture proposal
to provide safeguards in case a deal collapses during negotiation