A letter of intent (LOI) is a document that outlines the general terms and conditions of a proposed agreement or transaction. It is often used as a starting point for negotiations and can be used in a variety of contexts, such as business transactions, real estate deals, and mergers and acquisitions. The purpose of an LOI is to establish a framework for further negotiations and to ensure that both parties have a clear understanding of the proposed deal before proceeding. However, it is typically non-binding, meaning that the parties are not legally obligated to follow through with the proposed deal.
On the other hand, a term sheet is a document that outlines the specific terms and conditions of a proposed agreement or transaction. It is typically more detailed than an LOI and provides more information about the proposed deal, such as the purchase price, payment terms, and any contingencies. A term sheet can be used in a variety of contexts, such as venture capital investments, private equity deals, and real estate transactions. The purpose of a term sheet is to provide a clear and concise summary of the proposed deal and to serve as a starting point for drafting a formal agreement.
A term sheet may or may not be binding depending on the document and intent of the parties involved. A non-binding term sheet is usually used as a framework for further negotiation, while a binding term sheet is legally enforceable.
In summary, a letter of intent is a general document that outlines the main points of a proposed agreement or transaction, while a term sheet is a more detailed document that covers specific terms and conditions of the proposed agreement or transaction.