A letter of intent is a pre-contractual document recording the parties’ preliminary understanding of a planned transaction, identifying which provisions are binding and which are not, and used in food trade to secure volumes or capacity while final terms are negotiated.
In trade practice
In agri-food trade, a letter of intent is typically issued by a buyer to a supplier to reserve production capacity or a harvest allocation before a full supply contract is signed. It should state clearly which clauses bind both parties immediately, such as confidentiality or exclusivity, and which are subject to further negotiation. A common mistake is treating the entire document as non-binding, which can leave capacity reservations unenforceable. Legal review is advisable before signature, particularly where minimum volumes or advance payments are implied.
In a specification
A specification or supply contract will often reference a preceding letter of intent to confirm that agreed quality parameters or pricing mechanisms carry forward into the definitive agreement.