You keep talking to him/her and 6 months later the app shows up and it is a piece of crap (not as advertised). The customer doesn't buy it. Yet, you have stolen 6 months of valuable time from the customer which he could have used on productive things (or searching for another app that meets his needs).
Not illegal but definitely unethical.
1) if i were in the shoes of the customer, and i didn't have a prototype in front of me, i'd either ask for one or assume it didn't exist.
2) how is this different from posting up a splash page asking for email addresses for a future public release?
3) is the false impression the only thing that matters to you? if they instead implied that they were designing it and there was no implication of cut code or working prototypes, would that make this somehow a better situation in your eyes?
You really don't see how lying to a customer's face about having code written is different from putting up a splash page saying something might exist in the future?
i'm not really here to agree with how they went about doing things with respect to how they claim to have pitched the product.
the process that they took would work the exact same if they were completely upfront about what they were doing, though, and i think its worth learning from.
the letter of intent isn't legally binding, so its just a way to gauge business interest.
i mean, i'd be willing to sign a non-binding LOI if it meant someone would make use of it to independently develop an application that i would find beneficial.