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SC: Unless Intention is Evident from the terms of a Letter of Intent, the contract cannot be considered as a Binding Contract

Team SoOLEGAL 27 Jul 2021 4:39pm

SC: Unless Intention is Evident from the terms of a Letter of Intent, the contract cannot be considered as a Binding Contract

While dismissing an appeal filed by a government company South Eastern Coalfields Ltd. the Supreme Court held that, if the intention from the terms of a Letter of Intent does not emerge evidently then it is not a binding contract.

The division bench comprising of Justices Hemant Gupta and S.K. Kaul noted that since primarily Letter of Intention specifies the intention of the parties entering the contract, the intention must be explicit and absolute.

In the instant case, the company to the respondent firm issued a Letter of Intent while granting a contractual work of Rs. 387.40 lacs. A writ petition was filed by the firm before the high court praying abrogation of the termination letter and recovery order issued to them. The high court opined that the contract between the parties were void, as the work allocated to the petitioner, i.e., furnishing of performance security by the responded was never completed. Accordingly, the consequence of such negligence included forfeiture of bid security and cancellation of the award. Hence, just the relinquishment of bid security was maintained, but recovery of the additional award in the contract was held not recoverable.

The Supreme Court re-affirmed the decision taken by the High Court and concluded that there was no binding contract between the parties involved. The bench added, Mobilization at site by the would not amount to a concluding contract inter se the parties.



Tagged: Supreme Court   Letter of Intent   Justice Hemant Gupta   Justice S.K. Kaul   High Court   South Eastern Coalfields Ltd  
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