Letter of Intent to Hire

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What is

Letter of Intent to Hire

A letter of intent is an instrument by which one person, or an entity expresses its intention to enter into a contract with another person or entity for any contemplated transaction. It is not an offer or a promise to carry out the contemplated transaction nor does it form a legally binding contract. It is an instrument laying out the basic elements of the terms and conditions that will be applicable to a contemplated transaction if carried out. It is generally used in commercial transactions to initiate negotiations between the interested parties.

A letter of intent can be used for different types of transactions and named differently for the purpose of convenience. The employer issue letter of intent to hire to the prospective employees, most government companies enter into a memorandum of understanding with the parties they intend to transact with, and even private equity investors issue letters of interest termed as Term Sheets to layout the basic terms to be incorporated in final transaction documents. Such letters, memorandums, term sheets, etc. do not express the certainty of the transaction but inform the interested party of all obligations, terms, and conditions which may be applicable to the other party in the event the transaction is carried out

1. What is a letter of intent to hire?

A letter of intent to hire a contractor is an informal way of forming an agreement between the contractor and the hiring company. Companies might use a letter of intent instead of an offer letter because they haven't worked out all the details of the job or they can't legally make an offer yet.

2. Is a letter of intent to hire binding on the employer?

A letter of intention has been held not to be binding on the parties according to various judgments of courts of law. 

However, where the letters of intent incorporate the following the parties may be bound by it;

  • All the elements of a valid contract,
  • Detailed rights and liabilities of the parties,
  • Do not refer to a future agreement,
  • Where both the parties act on such representations

Hence, depending on the facts and circumstances of the case and language used thereto, a letter of intent may bind the parties. It is therefore advisable to seek legal advice

3. When is a letter of intent to hire issued?

A letter of intent to hire is issued when a prospective employer expresses an interest to hire them specifying the terms of employment during the probation. Only on the acceptance of such terms by the candidate, the employer offers employment.