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prof s c pratihar (medical practitioner &legal studies)     23 September 2008

letter of intent

dear members,

                         whether such a letter constitutes a binding contract in law or whetherit is a mere incholate transaction?


 4 Replies

SHEKHAR MISHRA (public servant)     24 September 2008

No   binding    contract.

Adv.Shine Thomas (Advocate)     24 September 2008

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.


P.Elamaran (Law Officer in a CPSU)     25 September 2008

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,


Law Aspire (Legal)     28 August 2018

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

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