Understanding the Differences: Letter of Intent, Offer Letter, and Appointment Letter – Can You Help?

Dear All,

Please educate me on the differences between 'Letter of Intent', 'Offer Letter', and 'Appointment Letter'. I urgently need this information. Quick responses will be highly appreciated.

Regards,
Aashnaa

Thank you for sharing the link. I have read through the thread but could not find the exact difference. It seemed to focus more on a discussion about which one to issue to an employee. I am seeking a clear distinction between the two types of letters.

I look forward to your response.

Dear Aashnaa,

The question is very nice. Let's start from basics.

The term employment is basically a contractual relationship between an employer and an employee, where there is definite tangible or intangible consideration for both parties.

In a contractual relationship, there are two important elements:

1. Offer
2. Acceptance

The above forms the premise for the question raised by you. Please find a point-wise reply to your query:

1. Letter of Intent - The law states that mere intention to do something is not binding on the involved parties. This implies that the agreement is not enforceable in the court of law if the candidate does not join or if the employer dissolves the position before the joining date. Therefore, a Letter of Intent illustrates the willingness of the employer to hire the candidate but may not necessarily lead to a successful hiring. This practice is common among firms facing strong competition and generally does not include compensation details.

2. Offer - According to the Contract Act, an offer involves a definite intention to enter into a legally binding relationship. An offer expresses interest by one party to the other to do or not to do something, with terms that are clear and intended to create a legal relationship.

3. Appointment Letter - This is essentially a form of contract between the employer and the employee, involving offer, acceptance, and enforceability by law, thus qualifying as a contract.

Regards,

Avinash Singh

avinash09babbi@gmail.com

No, I have just confirmed that the Letter of Intent doesn't mention anything about the CTC.

Dear Avinash,

I have one query. When is the letter of intent issued, and is CTC mentioned? In my organization, when we decide to take a candidate, we directly extend the offer letter and issue the appointment letter on the day of joining. Do I need to change it?

Kind regards,
Sweta

Putting it simply-

A Letter of Intent or LOI is like a preliminary document setting out the understanding between two parties who want to contract with each other. It is not necessary that this is confined to one sphere of contract such as an employer-employee relationship; it includes various businesses. This can be binding or non-binding legally, depending on what the parties specifically agree it to be.

An offer letter is the document that sets out the terms on which an Offeror (the person making an offer) is offering the setting up of a formal relationship to the Offeree (the person to whom an offer is made). This can be, for instance, the terms of service which an employer offers to a chosen/potential employee. This letter is not binding on the Offeror unless it has been accepted by the Offeree. The offer letter can also be more generalised and set out only the broad terms of the deal, leaving the actual details to be captured by the parties in a subsequent contract between them.

An appointment letter is a stage after the offer letter. This is the letter provided by an Offeror to an Offeree after the Offeree has accepted the Offerer's terms of the offer informed to him/her and is ready to take up an appointment to a certain post based on such terms. But again, this is not a formal employment or engagement contract but just a document evidencing the terms for appointment (as may have been agreed to by the parties in prior negotiations of the offer letter or in person).

When does the letter of intent/offer letter become legally binding on either party? Usually, the candidate resigns from the previous employer based on these letters. Can the selected candidate refuse to join having given his acceptance in the letter of offer, or can the employer refuse to take in a selected candidate after his acceptance and before he actually joins, while the candidate would be put in a difficult personal situation?

What exactly is the legal position on this in terms of the letter of intent/offer letter? What are the ethics involved and good practices? Are there any known standard quoted case laws, especially in recent times with changing jurisprudence and mass recruitment, and sudden recessionary experiences lately?

Hope the discussion gets enriched further as a learning experience here.

Regards,
Kshantaram

Date: 16.01.10

Hi, Greetings to all,

Hi, this is Raj. Firstly, I want to state that the above clarification given by Avinash Singh was highly appreciable (for the difference between Letter of Intent, Offer letter, and Appointment Letter). Can you clarify by giving some good examples so that it will be helpful for beginners in this field?

Regards

I tend to agree with Avinash.

Simply put:

A letter of intent just states the desire of the employer to make an offer.

A letter of offer is the actual offer document.

A letter of appointment comes after the letter of offer is accepted by the prospective employee.

Thank you, Avinash and Gilli, for the good explanations.

However, other than the appointment letter, which is a legally binding contract, to what extent are the other two forms of letters legally binding? What if an offer is made, accepted, and then retracted by either one of the parties? How legally binding is a letter of intent?

Regards,
Rosettee

I did not take a copy of the letter of intent when I signed it. Is it okay, or is there any problem? I am in the 7th semester, and I have been placed in an IT company. Is it important to take a copy for yourself for future reference? Is it okay or not?

Hello respected seniors, can anybody tell me if, after receiving the offer letter, the employer (X) wants a signed copy as proof of receipt from the employee (Y)? At this moment, can the employer (X) legally bind with the employee (Y)? Please reply.

Regards,
Machhindra

LOI stands for Letter of Intent, which represents a mutual willingness on the part of both parties (the employer and the employee) to enter into a contract.

Following the mutual understanding between the employer and the employee, the company offers the job and also issues a job offer letter. The job offer letter is then delivered to the selected candidate, and upon acceptance by the candidate, the HR department issues the appointment letter.

Understanding Different Types of Letters in Recruitment

A letter of intent is similar to a cover letter, as it is provided by the candidate to the company and it defines the experience and qualifications of the candidate.

An offer letter is given to the people who have cleared all the selection rounds and are finally selected for that particular job. It contains their designation, salary structure, rules, and regulations of the organization, etc.

An appointment letter is proof of appointment that a person is accepting the offer, ready to work for the company, and agrees with the terms and conditions of the company.