In legal and economic transactions, preliminary negotiations often end with the parties signing a letter of intent. This document is commonly used by employers who want to let their potential employees know that they are interested in them.

It would seem that immediately after receiving a letter of intent, we can breathe a sigh of relief that we have succeeded and that we already have a contract in our pocket. Nothing could be further from the truth, a letter of intent is not yet a signing of a contract, what’s more – it is not even treated on a par with a preliminary contract. It could even be said that a person signing a letter of intent in which he expressed his will to conclude a cooperation agreement in the future, withdrawing from his promise, will not suffer any legal consequences.

A letter of intent is a written, preliminary declaration of intent regarding its past legal, commercial or economic activities. This document contains a declaration of intent of both or one of the parties and, in principle, expresses only the will to conclude the agreement after negotiations. A person intending to conclude a specific contract expresses this in a letter addressed to another person, at the same time asking for confirmation. It may take place on the returned copy of the letter of intent or in a separate letter. The letter of intent may also take the form of a letter in electronic form. Its main function is to express the will of the parties to conclude a definitive contract in the future, as well as to specify the details of the contract. The letter may be issued by one or more of the parties, both natural and legal persons.

In the simplest terms, the letter of intent defines the scope of the future contract and intended activities, and may also contain a more detailed description of the planned project. Usually, the discussed document is concluded after reaching an agreement regarding further cooperation and willingness to show the contractor’s commitment to a given project.

The structure of the letter of intent should contain specific provisions regarding the future rights and obligations of the parties, developed during the negotiations. However, it should be remembered that the letter of intent does not bind the parties signing it in any way. This is due to the fact that this institution has not been regulated by any legal act, and common courts have not yet developed a uniform line of case-law. Thus, signing a letter of intent and its observance or lack of it does not entail major legal consequences, so it is not possible to appeal against the obligation resulting from this document. This seems to be confirmed by the Supreme Court itself in its judgment of 6 October 2011 (file reference: V CSK 425/10), where it stated that a joint letter of intent usually expresses only the will to conclude an agreement after negotiations. It is a mistake to treat it on a par with a preliminary contract. The Supreme Court stressed that the letter of intent provides for the possibility of concluding a contract in the future and defines the rules of possible cooperation, but it does not create a relationship of obligation for the parties.

This is due to the fact that the intention to conclude a contract manifests itself only in the form of the „willingness of the parties”. On the other hand, the mere intention to conclude a contract cannot yet be treated as a decision to conclude it, since such conduct does not reveal a firm decision. The letter only informs about the likelihood of such a step, without depriving the negotiating parties of the competence to decide on it in the future.

It should be borne in mind that simply naming a document with a letter of intent does not determine the legal consequences of the letter. In the form of a letter of intent, declarations of will may be expressed in the form of an offer accepted by the addressee. Therefore, if the content of the document clearly bears the characteristics of a contract, then it will entail the legal consequences of such an agreement.

With regard to legal significance, it cannot be said that the letter of intent does not have one. This document means the beginning of negotiations, which should be conducted in accordance with general principles, i.e. in good faith, i.e. in trust that the parties are striving to conclude a specific contract. It should be emphasized, however, that this does not result in an obligation on the parties to conclude it.

However, if the letter of intent signed by both parties contains proposals for pre-contractual agreements, they should be considered legally binding. The lack of firmness of the statements made in the letter of intent refers only to the future planned contract, whereas the agreements defining the path to the conclusion of such a contract must be regarded as binding.

The letter of intent is not an institution regulated in detail in Polish law. Its content, form, effects and purpose have been developed by economic practice, and therefore does not have the characteristics of a formal letter. The document in question may therefore be concluded in any form, but its content depends on the joint will of the parties.

Despite the lack of obligatory elements of the letter, it is assumed that the letter of intent should contain:

• a commitment to negotiate in good faith;
• a commitment not to renegotiate already agreed provisions;
• authorization to start the marked work;
• a declaration of payment of the appropriate amount.

The effect of signing a letter of intent, which, although it provides for the possibility of concluding an agreement in the future and defines the rules of possible cooperation, does not result in the formation of a contractual relationship for the parties.

Although the letter generally does not have any legal effect, in some situations the party may be held liable. If one of the parties after signing the letter continues to negotiate with a competitor on the same matter, it may then be held liable for breach of contract. Therefore, if there is a breach of the obligation to negotiate in good faith, the party violating the provisions may be held liable for damages. The scope of compensation includes compensation for damage suffered by the other party because it counted on the conclusion of the contract.

In the letter of intent, the parties may also extend the scope of liability, i.e. specify additional consequences of negotiating in bad faith, m.in. they may undertake to reimburse the costs incurred by the other party during the negotiations.

As indicated above, a letter of intent cannot be seen as a preliminary contract. Despite this, the parties involved in the negotiations often make this mistake.

First of all, it should be borne in mind that the preliminary agreement has been strictly regulated in the provisions of the Civil Code, and thus, its signing results in the parties’ obligation in the form of concluding the final contract. This means that after signing a preliminary contract, in which the parties undertake to conclude, for example, a contract for the performance of a specific work, the parties are obliged to conclude this final contract in the future. So if one of the parties tries to evade the conclusion of this contract, then the other of them is entitled to a claim for compensation for the damage (compensation) that it suffered because it counted on the conclusion of the promised contract. In addition, if the preliminary agreement meets the requirements on which the validity of the final contract depends, in particular the requirements as to the form, then the injured party will be entitled to claim the conclusion of the final agreement.

Claims under the preliminary agreement expire after one year from the date on which the final contract was to be concluded. If the court rejects the request to conclude the final agreement, the claims under the preliminary agreement expire after one year from the date on which the judgment became final.

In turn, a letter of intent is not treated as an obligation and therefore does not have any legal effects. The parties are not obliged to do anything. This means that there is no guarantee that the contract will actually be concluded in the future.

In practice, it also often happens that employers, wanting to „reserve” an employee for a certain period, decide to issue a letter of intent to the employee. Unfortunately, most employees do not know exactly what this letter is and confuse it with a preliminary employment contract.

At the same time, not always the preparation of a letter of intent will not give grounds to hold such a „non-verbal” employer liable. This is due to the fact that such a document may have all the formal elements of a preliminary employment contract, and then failure to perform such a contract will result in the employer who evades the obligation to employ an employee to expose himself to the payment of appropriate compensation.

Pursuant to Article 29 of the Labour Code, a document will be a preliminary agreement if it specifies such elements as:

• type of work;
• the place where the work is carried out;
• remuneration for work corresponding to the type of work, with an indication of the components of remuneration;
• working hours;
• the date of commencement of work.

Source: https://poradnikprzedsiebiorcy.pl/-list-intencyjny-konsekwencje-prawne-podpisania

Projekt otrzymał dofinansowanie z Norwegii poprzez Fundusze Norweskie 2014-2021, w ramach programu „Dialog społeczny – godna praca”.