What is a letter of acceptance (LOA), and how is it different from a work order or a letter of intent?
A letter of acceptance (LOA), also called a letter of award, is the client's formal notice to a bidder that its tender has been accepted; a work order authorises the start of the work, and a letter of intent signals an intention to award that may or may not be a binding contract.
Also called LOA, letter of award, work order, letter of intent, LOI.
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Letter of acceptance in plain words
In Indian tendering the three often arrive in sequence: a letter of intent, a letter of acceptance, then a formal agreement and a work order, though the order and the names differ between clients. Some tenders state that the accepted letter of acceptance or work order binds the parties until the agreement is signed. The letter of acceptance also starts deadlines: under the FIDIC Red Book (1999), for example, the performance security is due within 28 days of receiving it; the FIDIC Silver Book counts from the contract agreement instead.
What is the difference between a letter of intent, a letter of acceptance and a work order?
A letter of intent states an intention to award; a letter of acceptance formally accepts the tender; a work order authorises the contractor to begin the work.
| Letter of intent | Letter of acceptance | Work order | |
|---|---|---|---|
| What it says | The client intends to award | The tender is accepted | Start the work |
| Binding? | Generally not, unless its terms clearly show an intention to be bound | Some tenders state it is binding | Authorises work under the contract |
| What it starts | Nothing contractual on its own, unless its terms say so | Deadlines such as furnishing performance security | The site work that the first RA bill will claim |
From the Supreme Court of India in South Eastern Coalfields v. S Kumar's Associates AKM (JV), as summarised by IndiaLaw, Indian tender conditions and FIDIC sub-clause 4.2 (1999 Red Book). Whether any of these binds is a legal question for your contract.
Why does letter of acceptance matter?
The letter of acceptance starts deadlines with a cost, such as furnishing performance security, and the work order starts the work that the first RA bill will claim. Missing either date costs money before a single bill is raised.
Where does letter of acceptance mislead?
Whether a letter of intent or a letter of acceptance creates a binding contract depends on its wording, the tender and the parties' conduct; the Supreme Court of India has held that a letter of intent is generally not a binding contract unless its terms clearly show that intention. Check your contract and current law, and take legal advice.