How to start a negotiation
You can send a Letter of Intent (LOI) to show your honest and sincere intention to engage in good-faith negotiations.
This document sets up a framework for future contract terms and conditions. This way, you can prove your offer is genuine and easily launch into a discussion that seals the deal. For instance, this letter works well when making large transactions involving:
- Manufactured goods
- Contracted services
- Business shares
- Real estate
An LOI also works well when suggesting a partnership or negotiating commercial lease terms. That’s because—no matter what type of business you’re conducting—it’s important to do your due diligence before finalizing an agreement with a legal contract
Due diligence means preparing and doing research before making an informed decision. A Letter of Intent helps with that by providing a framework for investigations and giving the time to perform them.
In sum, an LOI gives you:
- The chance to make your intentions known
- The time to investigate all aspects of a deal
- The option to back out if things don’t go as planned
That’s why a Letter of Intent is useful for starting negotiations. You get your foot in the door ahead of other interested parties by proposing terms that are open to change.
Then, once you get to talking, you can ask detailed questions that the other person might’ve been reluctant to answer if they didn’t know your level of commitment.
If neither of you is satisfied with the proposed contract terms, you can change your mind without any legal repercussions.