Letter of understanding

A Letter of Understanding (LOU) is a formal text that sums up the terms of an undertakings of a contract which may have been negotiated up to this point only in spoken form or otherwise informally. It reviews the terms of an agreement for a service, a project or a deal and is often written as a step before a more detailed contract is issued.[1]

This article is about pre-contractual matters. For an intended common line of action, see memorandum of understanding. For financial obligations, see Letter of credit.

The LOU may provide for example:

  • Detailed summary of the work to be performed
  • Tasks of the service provider and the receiver
  • Milestones for the work to be done
  • Work steps that have been accomplished already

References
  1. Belew, Shannon (2018). "Benefits of Developing a Written Consulting Contract". About.com. Consulting.
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