Letter of intent

A letter of intent (LOI, 각서 覺書) is a document outlining an agreement between two or more parties before the agreement is finalized.

According to Wikipedia, the concept is similar to a heads of agreement. Such agreements may be Asset Purchase Agreements, Share Purchase Agreements, Joint-Venture Agreements and overall all Agreements which aim at closing a financially large deal.

Key words
letter of intent (LOI), contract, term sheet, memorandum of understanding (MOU)

Purposes of LOI
The most common purposes of an LOI are:
 * To clarify the key points of a complex transaction for the convenience of the parties, as in a large-scale syndicated loan;
 * To declare officially that the parties are currently negotiating, as in a merger or joint venture proposal; or
 * To provide safeguards in case a deal collapses during negotiation.

Contract
LOIs resemble written contracts, but are usually not binding on the parties in their entirety. A contract, by contrast, is a legal document governed by contract law.

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.

Term sheet
An LOI may also be referred to as a term sheet or discussion sheet.

The terms reflect different styles (an LOI is typically written in letter form and focuses on the parties' intentions; a term sheet skips formalities and lists deal terms in a bullet-point summary), but usually do not indicate any difference under law.

MOU
There is a specific difference between a letter of intent and a memorandum of understanding (MOU); an LOI outlines the intent of one party toward another with regard to an agreement, and may only be signed by the party expressing that intent, whereas an MOU must be signed by all parties to be a valid outline of an agreement.

Nevertheless, LOIs are fairly often incorrectly referred to as MOUs and vice versa.

Effect of LOI
An LOI is effective among the concerned parties. In general, it is not binding in legal terms, and it cannot set up against a third party.

However, an LOI may sometimes be interpreted by a court of law as binding the parties to it, if it too-closely resembles a formal contract.

In this regard, LOIs may be regarded as binding for the purpose of litigation, admissibility as evidence of a claim, etc. by means of: In most cases, the above methods are in need of further lawsuits to demand and ensure their purported performance.
 * A notary public; or
 * A third party witness.