letter of intent

No   binding    contract.

A Letter of Intent  is a document outlining an agreement between two or more parties before the agreement is finilised.A LOI may also be referred to as a MOU or 'term sheet'.These all documents are substantively the same.

The purpose of a LOI may be:

• to clarify thekey points of a complex transation for the convenience of the parties


• to declare officially that  the parties are currently negotiating,as in a merger,aquisition,joint venture,or strategic alliance proposal,


• to provide safeguards in case a deal collapses during negotiation.

Binding Nature of LOI

For this the Court has examined five factors in Texaco,Inc v Pennzoil Co.

• the language of the LOI,


• the context of the negotiations,


• whether either or both parties have partially performed their obligations,


• whether there are any issues left to negotiate,or whether any of these issues are of  material importance to the transaction as a whole,


• whether the LoI intent describes a complex transaction which customarily involves definitive written agreements.

Whether a LoI will give rise to a binding contract depends on the circumstances of each case.

The use of LoI in contracting is ingrained  within the construction industry and can often provide a fast solution to finalise contractul arrangements and ensuring the timely commencement of a project.

To ensure that a letter of intent is contractually binding,it should:

• clearly state that it is a contractully binding document,


• ensure that all essential terms of the agreement are discribed with certainty,


• provide something of value to pass from one party to another,such as a monetary sum is exchange for work done.

www.rics.org 

Dear Prof. S.C.Pratihar,

In the field of commercial contracts, after opening of the bids, the successful bidder will be issued a letter of intent (LoI) and then a letter of award (LoA) asking him to commence the works with regard to an awarded contract. These LoI , LoA and General Conditions and Special Conditions if any , are certainly part and parcel of a contract.

Warm regards,

P.Elamaran.

Letter of Intent is the Letter of award itself, there cannot be two documents for intimation .