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A contractor letter of intent is used to discuss an exchange of services for compensation between a contractor and a client. This form has language that would be found in an independent contractor agreement, but leaves out many of the binding provisions. A letter of intent will describe the types of services to be performed, the payment plan, the timeline of the contractor’s portion of the project, and other terms that enable the parties to negotiate the final contract in good faith.
By Type (3)
Construction Letter of Intent – Used to enter into discussions about construction work on a project between a client and a construction independent contractor.
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Software Development Letter of Intent – Communicates the terms and conditions of a potential working relationship between a software developer and a client.
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Subcontractor Letter of Intent – Relays the proposed terms for a subcontractor to work on a contractor’s project.
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Contents |
Sample
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CONTRACTOR LETTER OF INTENT
Date: [DATE]
[SENDER NAME]
[SENDER STREET ADDRESS]
[SENDER CITY, STATE, ZIP]
[RECIPIENT NAME]
[RECIPIENT STREET ADDRESS]
[RECIPIENT CITY, STATE, ZIP]
RE: [SUBJECT MATTER]
This Letter of Intent (the “Letter”) sets forth the proposed terms and conditions of the Services described hereunder and shall govern the relationship between the Client and Contractor (the “Parties”) until replaced by a definitive, formal agreement addressing the same services and subject matter (the “Definitive Agreement”). The Services considered in this Letter and in the Definitive Agreement are subject in all respects to the following:
1. THE CLIENT. [CLIENT NAME] (the “Client”) with a mailing address of [ADDRESS].
2. THE CONTRACTOR. [CONTRACTOR NAME] (the “Contractor”) with a mailing address of [ADDRESS].
3. THE SERVICES. Unless otherwise agreed to by the Parties, the Contractor agrees to provide the following services: [DESCRIBE SERVICES] (the “Services”).
4. LOCATION. The primary location for the Services performed by the Contractor shall be: [ENTER ADDRESS / DESCRIBE LOCATION] (the “Location”).
5. PAYMENT. Payment shall be made as follows: [DESCRIBE MANNER OF PAYMENT].
6. PAYMENT METHOD. The Contractor shall be paid, in accordance with Section 4, in the following manner: [DESCRIBE METHOD OF PAYMENT].
7. START AND END DATE. The Contractor shall start providing the Services on [START DATE] and the Services shall be due [DUE DATE].
8. INTENTION OF THE PARTIES. This Letter sets forth the intentions of the Parties to use reasonable efforts to negotiate, in good faith, a Definitive Agreement with respect to all matters herein. Notwithstanding paragraphs 8 through 10, which shall be legally binding, any legal obligations with respect to all other matters shall only arise if and when the Parties execute and deliver a Definitive Agreement.
9. GOVERNING LAW. This Letter shall be governed under the laws of the State of [STATE NAME].
10. SIGNATURES.
Client Signature: ___________________ Date: [MM/DD/YYYY]
Print Name: [CLIENT NAME]
Contractor Signature: ___________________ Date: [MM/DD/YYYY]
Print Name: [CONTRACTOR NAME]
When LOIs are Used in Contracting
A contractor letter of intent is an informal document that is used to enter into discussions about hiring an independent contractor to work on a client’s project. In most cases, it’s best to create a formal contract as the letter of intent only outlines the basics of the working relationship. However, sometimes it’s not possible to enter into a definitive agreement right away, such as in the following situations:
- Permits have not cleared.
- Financing isn’t complete.
- Project timeline is short.
- Awaiting contract sums or liability approval.
Client-Contractor Relationship
When a contractor’s services are requested using a letter of intent, it does not create a traditional employer-employee relationship even though the contractor works for the client. The contractor remains independent, meaning they set their own hours, hire workers, and perform tasks in the order they see fit. It also means they are not entitled to unemployment insurance, workers’ compensation, or matched Social Security payments.
Benefits
Sending a letter of intent to a contractor means the client is not required to hire the contractor for the job, but they can settle certain aspects of the arrangement, such as price, timeline, and other details. The contractor is also not bound to the letter, and they can walk away from the project without consequence.
A letter of intent is useful when a client is looking to hire a contractor but the project is still in the planning stages. In some cases, they might even ask the contractor to start work if they’re on a tight schedule.
Quantum Meruit
Quantum meruit, meaning “what one has earned,” refers to the client being obligated to pay the contractor for any services already provided. The payment amount included in the letter is not a legally binding provision. However, if the contractor provides services before a formal agreement is signed, the client will likely owe them for any work performed.
Binding vs. Non-Binding
A letter of intent may have binding and non-binding language. Since a letter of intent is only a precursor to a final contract, the parties only need to comply with the terms that are legally binding.
In order for a letter of intent to be completely binding it would have to contain the following provisions, at which point it would essentially be considered a legal contract:
- Offer and Consideration: In the case of contractors and clients, this means the offer of compensation in exchange for providing services.
- Acceptance: The contractor must agree to the terms.
- Mutuality: The document must have language creating a binding contract that both understand and agree to.