LOI vs ICPO vs SCO, FCO and SPA: Commodity Trade Documents Compared
Compare LOI, ICPO, SCO, FCO and SPA documents, their usual deal stage, legal effect, issuer, purpose and common misuse, with free templates.
LOI vs ICPO vs SCO, FCO and SPA at a glance
| Document | Issued by | Typical stage | Legal effect | Main purpose | Common misuse |
|---|---|---|---|---|---|
| SCOSoft Corporate Offer | Seller | Initial seller indication | Usually non-binding | Shows indicative product, quantity, price basis and procedure | Presented as proof that stock or allocation exists |
| LOILetter of Intent | Buyer | Buyer interest | Usually non-binding | States intended purchase terms and readiness to proceed | Treated as proof of funds or a bank commitment |
| ICPOIrrevocable Corporate Purchase Order | Buyer | Firm buyer proposal | Depends on wording and governing law | Confirms detailed purchase terms and accepted procedure | Assumed to be binding merely because it says irrevocable |
| FCOFull Corporate Offer | Seller | Firm seller offer | May become binding if accepted as drafted | Sets firm product, price, delivery, payment and validity terms | Issued before seller authority, allocation or compliance is verified |
| SPASales and Purchase Agreement | Both parties | Contract execution | Intended to be binding | Governs the sale, performance, remedies and disputes | Signed while commercial schedules or payment terms remain incomplete |
How the documents move a transaction forward
An SCO starts the conversation from the seller's side. An LOI answers from the buyer's side without usually committing either party. An ICPO is a more detailed buyer proposal, but its title does not decide whether it is legally binding. The FCO sets the seller's firm commercial position. The SPA then consolidates the agreed product, specification, quantity, Incoterm, shipment schedule, payment instrument and dispute terms.
What to verify before relying on any document
- Confirm the signatory's authority and the legal identity of each party.
- Check that commodity, grade, quantity, price and Incoterms 2020 place match across documents.
- Do not treat an LOI or ICPO as proof of funds, or an SCO or FCO as proof of stock.
- Keep bank coordinates out of unnecessary circulation and verify changes through a known channel.
- Ensure the SPA and LC application use compatible documentary requirements and timelines.
Download the relevant draft from the free commodity trade template library, then adapt it to the transaction and obtain legal, banking and compliance review where required.
Frequently asked questions
What is the usual order of SCO, LOI, ICPO, FCO and SPA?#
A common sequence is seller SCO, buyer LOI or ICPO, seller FCO, then a negotiated and signed SPA. Real transactions often omit one or more preliminary documents, so the parties should follow the agreed procedure rather than assume every step is mandatory.
Is an ICPO legally binding?#
Calling a purchase order irrevocable does not automatically create an enforceable sale contract. Its effect depends on offer, acceptance, certainty of terms, governing law and the parties' conduct. The signed SPA normally contains the complete binding obligations.
What is the difference between an SCO and an FCO?#
An SCO is an indicative seller communication whose price, quantity and availability remain subject to confirmation. An FCO is a firmer seller offer with defined commercial terms and a validity period, although the SPA normally remains the final contract.
Can an LOI replace an SPA?#
Normally no. An LOI records purchasing intent and headline terms, while an SPA defines detailed rights and remedies covering specifications, delivery, payment, inspection, force majeure, default, governing law and dispute resolution.
Do banks require an LOI, ICPO or FCO to issue an LC?#
Banks primarily require an approved LC application, credit facilities, compliance checks and the underlying contract or invoice. Preliminary trade documents can support the commercial file but do not replace the bank's own onboarding and credit process.