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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.
Business letters are the most formal method of communication following specific formats. They are addressed to a particular person or organization. A good business letter follows the seven C's of communication. The different types of business letters used based on their context are as follows, Letters of inquiry; Letters of claim/complaints
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Once the terms have been approved, the members of the project team have a clear definition of the scope of the project. They will then be ready to progress with implementing the remaining project deliverables. This phrase "terms of reference" often refers to the task(s) assigned to a consultant or adviser.