A purchase agreement is a legally binding document that outlines the terms and conditions of a transaction between a buyer and a seller. However, before the agreement is settled and signed, it goes by a few different names, depending on the context and stage of the transaction.
One common term used to refer to a purchase agreement before it is settled and signed is a «letter of intent» (LOI). A letter of intent is a document that outlines the basic terms of a potential agreement between two parties. It is often used as a preliminary document to express interest in a transaction and establish the main details of the agreement.
Another term that may be used to refer to a purchase agreement before it is signed is a «term sheet.» A term sheet is typically used in the context of a merger or acquisition, and it outlines the basic terms and conditions of the transaction. It may include information on the price of the sale, the timing of the transaction, and any other key details.
In some cases, a purchase agreement may also be referred to as a «memorandum of understanding» (MOU) or a «heads of agreement.» These documents are similar to letters of intent and term sheets in that they outline the main terms of a transaction, but they are typically used in more complex or lengthy negotiations.
It is important to note that while these documents may be used as a preliminary step in a transaction, they are not legally binding and do not necessarily guarantee that a transaction will occur. Only a signed purchase agreement is legally binding and enforceable.
In conclusion, a purchase agreement may be known as a letter of intent, term sheet, memorandum of understanding, or heads of agreement before it is settled and signed. These documents serve as preliminary steps in a transaction and outline the basic terms and conditions of the agreement. However, it is important to finalize and sign a legally binding purchase agreement to ensure that both parties are protected and the terms of the transaction are enforceable.