SC on Letter of Intent, Legal Character, Rights of Parties
Cancellation of Letter of Intent – Legal Character whether creates binding contract and rights of the parties
On 2.9.2022, the Letter of Intent for supply, installation and maintenance of upgraded ePoS Devices for five services was issued to the respondent. It was service contract based on rental payments.
On 6.6.2023 the appellant cancelled the LoI and invited fresh tenders.
The High Court quashed the cancellation of LoI as illegal and arbitrary.
HELD that the LoI creates no vested right until it passes the threshold of final and conditional acceptance. It is but a “promise in embryo” capable of maturing into a contract only upon the satisfaction of the stipulated reconditions or upon the issue of an LoA. A bidder’s expectation that such a contract will follow may be commercially genuine, but it is not a juridical entitlement. To hold otherwise, would be to bind the State in contract before it is consciously chosen to be bound a proposition foreign to both contract law and public administration.
Judgment of the Supreme Court in SLP (Civil) No.6531 of 2025 of State of Himachal Pradesh and another Vs. M/s. OASYS Cybernatics Pvt Ltd.
