Letter of Intent is a “Promise in Embryo” and Creates No Vested Right Until Preconditions Are Met

The Supreme Court clarified the legal nature of a Letter of Intent (LOI), holding that it is not a binding commitment unless clearly specified and its conditions precedent are fulfilled. Describing an LOI as a “promise in embryo,” the Court explained that it is generally intended to record preliminary understanding and future intentions, not to confer any immediate enforceable rights. The judgment lays out key principles regarding when an LOI becomes binding—language used, parties’ intention, fulfillment of preconditions, execution of formal agreements, and regulatory approvals. Merely receiving an LOI does not guarantee award of contract or creation of contractual rights. This ruling aims to reduce litigation where parties prematurely claim rights arising from non-binding LOIs. It provides clarity for commercial entities, ensuring better drafting of preliminary documents and preventing misuse of LOIs to assert contractual claims without meeting required conditions.