Letter of understanding
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A Letter of Understanding or LOU is a formal text that sums up the terms and understanding of a contract which mostly has been negotiated up to this point only in spoken form. 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.
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
The Letter of Understanding may also introduce key contractual elements, like payment terms.