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published: 23 Jan 2024 in Labour law

The devil is in the details. What is the difference between a letter of intent and a preliminary agreement?

Kamila Brzezińska
Kamila Brzezińska

Editor

Employees who have passed the recruitment process but are yet to sign an employment contract do not have a guarantee of getting the job. In such a situation, a letter of intent or a preliminary agreement is often used. But what are the differences between these options?
The devil is in the details. What is the difference between a letter of intent and a preliminary agreement?

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What is the purpose of the letter of intent and preliminary agreement?

Hiring processes are at times a very lengthy endeavor. Increasingly, they consist of multiple stages that can extend over a long period. It also happens that a considerable amount of time passes between informing a candidate of the positive outcome of the recruitment process and the very signing of the contract – for instance, due to the notice period applicable to the employee at the current workplace.

What's more, just because a candidate passes the recruitment process does not yet mean that the hiring will take place. After all, the employer may withdraw the offer, and the employee may find a competitive alternative in the meantime.

And this is where letters of intent and preliminary agreements come into play.

Letters of intent and preliminary agreements are intended to minimize or even completely remove the uncertainty that exists on both sides involved.

They are intended as a confirmation that the employer intends to accept a candidate to perform a particular job, and at the same time that the candidate, on his part, declares that he will accept said offer.

But what is the difference between a letter of intent and a preliminary agreement? As is usually the case, the devil is in the details.


What is a letter of intent?

A letter of intent, as the name suggests, expresses the intent of the employer and the candidate to enter into a future cooperation agreement.

However, and this is a key factor, neither party is obliged to honor the intention written in the letter.

Thus, both the candidate and the employer may simply colloquially "change their minds." Letters of intent as such are not regulated by Polish legislation, so the resignation from cooperation by either party will not be tied to consequences in legal terms.

However, the case may be quite different if the letter of intent signed by us has all the characteristics of a preliminary agreement.


What is a preliminary agreement?

A preliminary agreement is sometimes also called a promise of employment. And just this alternative name expresses the greater binding force of this type of contract.

The most important factors determining this force are the legal regulations associated with this form of agreement. This is because a preliminary contract is a civil law deal, and consequently: it is regulated by the Civil Code.

The provision that applies to the preliminary contract is Article 389 of the Act of April 23, 1964 of the Civil Code (i.e., Journal of Laws of 2022, item 1360, CC). According to this provision, one or both parties to the contract oblige themselves to enter into an established employment relationship.

What should be included in a preliminary agreement to make it binding?

Elements that should necessarily be specified in a preliminary agreement include:

  • The parties to the contract: the employer and the employee,
  • Type of the contract,
  • Contract date,
  • The type of the work or duties to be performed,
  • The location where said work will be performed,
  • Date of commencement of work,
  • Working hours,
  • Salary.

Withdrawal from the proposal – are there any consequences?

The key difference between a letter of intent and a promise of employment is the consequences of renouncing the employment proposal.

While in the case of a letter of intent, there are no legal consequences, failure to keep the promises outlined in a preliminary agreement is a matter governed by the Civil Code.

In addition, sometimes a contractual penalty clause can be added in the promise of employment, which makes for a particularly effective solution to ensure compliance with the deal. This ensures that if either party breaks the contract, it will be in principle unconditionally obligated to pay compensation to the other party.


Sources:

Civil Code – Dz.U. 1964 nr 16 poz. 93


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