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JC - Legal Updates - Letter of Intent is not a binding contract unless such intention is evident from its terms - Supreme Court

Legal Updates

03 Aug 2021

Letter of Intent is not a binding contract unless such intention is evident from its terms - Supreme Court

A letter of intent (“LoI”) merely indicates intent to enter into a contract and does not give rise to any binding relationship between the parties. An LoI can be construed as a binding contract only if clear and unambiguous intention of the parties to that effect is evident from its terms.

This was held by the Supreme Court in its judgment dated 23rd July 2021 in matter of M/s. South Eastern Coalfields ltd. & Ors. v. M/s. S. Kumar’s Associates AKM (JV).

The Court in the matter upheld the observation of the High Court and observed that as per the terms of the notice inviting tenders in the matter, there was no valid contract between the parties, since the necessary formalities set out thereunder were never completed.

In view of the above observations, the Court held that no contract had been concluded between the parties. As such the court held that the Appellant in the matter was only entitled to forfeit the bid security amount and could not seek any other amounts under the ‘contract’, the same never having been concluded.


For any further information, please contact Mr. Shubhabrata Chakraborti (shubhabrata.chakraborti@jclex.com) or Mr. Dhruv Malik (dhruv.malik@jclex.com).