Letter of Intent (LOI) vs. Letter of Award (LOA):

 Letter of Intent (LOI) vs. Letter of Award (LOA): Understanding the Legal Difference:

In the world of contracts and project execution — especially in construction, infrastructure, and government procurement — Letter of Intent (LOI) and Letter of Award (LOA) are two terms that are often used interchangeably.

However, their legal implications are entirely different.

 1️⃣ Letter of Intent (LOI): Expression of Intention — Not a Contract

An LOI signifies a preliminary intention of the employer to enter into a contract in the near future.

It’s an indication that the bidder has been selected, but the final contract terms are yet to be agreed upon.


 Legal position:

An LOI does not create a binding contract unless it expressly or impliedly shows intent to be bound.


Key Case Law:


Rajasthan Co-operative Dairy Federation Ltd. v. Maha Laxmi Mingrate Marketing Service (1996) 10 SCC 405

The Supreme Court held that an LOI merely indicates an intention to enter into a contract in the future and is not binding unless a formal agreement follows.


Dresser Rand S.A. v. Bindal Agro Chem Ltd. (2006) 1 SCC 751

The Court clarified that LOI is only a step in negotiation; it does not create enforceable obligations unless performance has commenced with the consent of both parties.


✅ In essence:

An LOI = “We intend to work with you, but let’s finalize the contract first.”


2️⃣ Letter of Award (LOA): Formation of Contractual Relationship

A Letter of Award is a formal communication of acceptance of the contractor’s bid or offer.

Once LOA is issued — and the contractor acknowledges or begins performance — a binding contract comes into existence, even before signing the detailed agreement.


 Key Case Law:


State of Haryana v. Malik Traders, (2011) 13 SCC 200

The Supreme Court held that once the LOA is issued and accepted, a concluded contract arises, binding both parties to perform.


BSNL v. BWL Ltd., AIR 2009 SC 403

The Court observed that acceptance of tender by issuing LOA amounts to conclusion of contract, even if a formal contract is executed later.

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