Guide to Rescinding a Letter of Intent (LOI)[2025]

A Letter of Intent (LOI) is a document expressing willingness to cooperate, typically used in the early stages of business negotiations or recruitment processes. While LOIs are generally considered non-binding, they may contain certain legally binding provisions.

1.1 Similar Documents：Admission Letters

University Admission Letters

Admission letters are legally binding agreements between educational institutions and students under specific conditions. These represent formal agreements established between schools and prospective students.

Employment Offer Letters

Employment offer letters constitute legally binding agreements between companies and candidates. They carry legal weight and obligations for both parties.

1.2 Conditions for Breaching Admission Letters

University Admission Letter Revocation

Universities typically require substantial justification for revoking admission letters, such as:

• 1、Failure to meet academic requirements
• 2、Submission of fraudulent materials

Employment Offer Letter Revocation

Companies must provide valid reasons for withdrawing employment offers, such as:

• 1、Failed background checks
• 2、Personal circumstances

If a candidate has already taken significant steps toward employment (such as resignation from current position or relocation), the company may face legal consequences for revoking the offer without proper justification.

LOIs are commonly used in three scenarios: recruitment processes, university admissions, and business negotiations.

2.1 LOIs in Recruitment Processes

These LOIs, issued by companies before formal hiring, typically include job descriptions, salary packages, start dates, and other terms.

2.2 LOIs in University Admissions

University admission LOIs are written confirmations of intent between students and schools, particularly in early or regular decision admissions.

2.3 LOIs in Business Negotiations

Business LOIs are preliminary framework agreements outlining cooperation models, transaction amounts, timelines, confidentiality clauses, etc.

Although issuing a Letter of Intent (LOI) is typically a well-considered decision, breaches may still occur in practice. Here, we focus on scenarios where the issuing party (not the recipient) can legally breach an LOI.

This typically applies to the recipient of the LOI. For example:

• 1、Recruitment: The candidate fails a background check.
• 2、University Admissions: The student does not meet academic standards.
• 3、Business Negotiations: Issues are uncovered during due diligence.

Companies or schools encounter economic crises, rendering compliance impossible. Natural disasters or policy changes affect cooperation conditions.

While we advocate for honoring LOIs wherever possible, there are times when breaching may be in your best interest. In such cases, preparation is key to mitigating potential losses.

5.1 If You Are the Breaching Party

Recruitment LOI Breach

• 1、Provide a written explanation outlining reasons for the breach (e.g., position adjustments, budget constraints).
• 2、Offer reasonable compensation where applicable (e.g., covering relocation costs).

  Compensating candidates helps protect your company's reputation, especially in the age of social media where grievances can have significant reputational impact. This also puts you on favorable legal and moral ground if the issue escalates publicly.

On the other hand, candidates sometimes breach recruitment LOIs after acceptance, often due to better opportunities. While no compensation is usually involved, candidates should notify HR as a matter of courtesy and professionalism.

University Admission LOI Breach

Universities rarely revoke admission letters unilaterally. Most breaches occur due to student-related reasons, which generally do not involve compensation. Common scenarios include:

• 1、Failing to Meet Academic Standards: Admission letters often specify that students must maintain certain grades, and failure to do so may lead to revocation.
• 2、Providing False Information: Submitting fraudulent documents can result in immediate revocation.
• 3、Misconduct: Behavior such as cheating or criminal activity may disqualify a student.
• 4、Failure to Meet Admission Requirements: Missing deadlines for tuition payments or document submission may also lead to revocation.

University-initiated breaches, though rare, might occur due to:

• 1、Economic or Policy Reasons: Budget cuts or policy changes may force schools to rescind admissions.
• 2、Errors in Admission: Mistakes in issuing offers are occasionally rectified with apologies and compensation.
• 3、Re-evaluation of Eligibility: Post-admission discovery of ineligible qualifications may prompt revocation.

Business Negotiation LOI Breach

LOIs should ideally be issued after due diligence to minimize potential issues. However, if due diligence is incomplete, LOIs must include provisions allowing breaches without penalty if due diligence results are unfavorable.

• 1、Provide substantial justification, whether due to commercial interests or unforeseen circumstances.
• 2、Mitigate reputational damage by compensating for significant losses if necessary.
• 3、Communicate clear reasons for revocation to prevent disputes.
• 4、Ensure alternative plans are in place to support long-term improvements over the breached agreement.

5.2 If You Are the Non-breaching party

Recruitment LOI Breach

If you are the non-breaching party, stay calm and assess whether you may have violated any LOI terms.

If you find any breaches on your part, it’s best to accept the situation. However, if the company’s actions have caused you losses (e.g., being unemployed after resigning), you can request reasonable compensation. Some companies may have taken steps to avoid liability, making compensation difficult to obtain. In such cases, you can consider engaging a lawyer or leveraging social media to negotiate.

That said, avoid spending too much time dwelling on the issue. Focus on your job search and return to resolving the breach once your situation stabilizes.

Additionally, if the cost of pursuing compensation outweighs the potential benefits, it may not be worth the effort. Treat it as bad luck and move on from dealing with an unreliable company.

University Admission LOI Breach

This situation is rare, and most breaches are due to students failing to meet requirements. If the breach is not your fault, you can file a complaint with the education department or seek opportunities at other institutions.

On the other hand, if the revocation is due to your own failure to meet conditions, accept the outcome and seek alternative schools.

However, it’s often better to focus on finding another university. An institution that unreasonably breaches an LOI demonstrates poor professionalism in its processes. Attending such a school may not be worth the trouble.

Business Negotiation LOI Breach

Among the three scenarios, pursuing compensation is most critical in cases of LOI breaches during business negotiations. Such breaches typically result in economic losses, which should be compensated. This is where your legal team or external legal counsel should step in.

Here’s the correct approach:

• 1、Activate Backup Plans Immediately: If a breach has occurred, implement a contingency plan right away. If no plan exists, develop one quickly to minimize business disruption and losses.
• 2、Seek Legal Accountability: Use legal channels to pursue compensation, particularly if confidentiality or exclusivity clauses were violated.
• Review and Improve Processes: Analyze the breach to identify weaknesses in your processes, such as due diligence, legal documentation review, or contingency planning. Address these gaps to prevent similar issues in the future.

Legal Liability

Since most LOIs are not legally binding, rescinding one is usually not considered a breach. However, if the LOI contains enforceable provisions (e.g., confidentiality or exclusivity clauses), violating these terms may result in legal liability.

Reputational Impact

• 1、Companies or schools that frequently rescind LOIs risk damaging their reputation within the market or industry.
• 2、Candidates or students who breach agreements may develop a negative record, affecting future opportunities.

Breakdown of Trust

Rescinding a Letter of Intent (LOI) can damage relationships between parties and impact future collaboration opportunities.

While most LOIs are non-binding, breaching provisions like confidentiality or exclusivity clauses may result in legal penalties.

Summary

Although LOIs are typically non-binding, their rescission can lead to various consequences and disputes across recruitment, university admissions, and business negotiations. By clearly defining terms during the drafting stage, handling rescissions lawfully, maintaining open communication, and minimizing losses for the other party, risks can be effectively mitigated, and long-term interests preserved.