Letter of Intent for Construction

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A construction letter of intent is an informal agreement between a construction contractor and a client, outlining the general terms of a potential project. It serves as a starting point for negotiations until a final agreement is reached. As the letter is not definitive, it mainly contains non-binding provisions, such as the parties’ duties, payment terms, and the project start date.

Letter of Intent for Construction

A construction letter of intent is an informal agreement between a construction contractor and a client, outlining the general terms of a potential project. It serves as a starting point for negotiations until a final agreement is reached. As the letter is not definitive, it mainly contains non-binding provisions, such as the parties’ duties, payment terms, and the project start date.

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Last updated October 28th, 2024

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A construction letter of intent is an informal agreement between a construction contractor and a client, outlining the general terms of a potential project. It serves as a starting point for negotiations until a final agreement is reached. As the letter is not definitive, it mainly contains non-binding provisions, such as the parties’ duties, payment terms, and the project start date.

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Overview of a Construction LOI

When to Use an LOI

A letter of intent can be used when a project needs to be started by a certain date but the parties still have important terms to negotiate. Before writing a final contract, the client and contractor will draft this letter with proposed terms so that work can begin.

Ending the Arrangement

A construction LOI mainly contains non-binding terms that can be altered or removed in the final agreement. The parties are generally allowed to end the relationship without consequence, though depending on the letter’s terms, the contractor may seek reimbursement for any costs incurred.

Enforceability

Letters of intent are generally not used to bind parties to a working arrangement and are signed to show the contract intends to start work even if some details haven’t been ironed out. For the LOI to be legally enforceable, it has to contain all the material terms of a legally binding contract.

Essential Clauses

  • Party Information – The names and addresses of the parties.
  • Services – The proposed work to be completed by the contractor.
  • Compensation – What the contractor would receive for the proposed work.
  • Completion Date – The intended timeline for completion.
  • Intention of the Parties – Language that relays that the terms are non-binding and will be negotiated in good faith until a finalized agreement is created
  • Signatures – The client and contractor’s signatures and the date of signing.

Sample

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CONSTRUCTION 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 CONTRACTOR. [CONTRACTOR NAME] (the “Contractor”) with a mailing address of [ADDRESS].

2. THE CLIENT. [CLIENT NAME] (the “Client”) with a mailing address of [ADDRESS].

3. THE SERVICES. The Contractor agrees to provide the following services: [DESCRIBE SERVICES] (the “Services”).

4. COMPENSATION. Payment shall be made to the Contractor as follows: [ENTER COMPENSATION AMOUNT].

5. PAYMENT METHOD. The Contractor shall be paid, in accordance with Section 4, in the following manner: [ENTER PAYTMENT METHOD DETAILS].

6. LOCATION. The Contractor shall perform services for the Client at the following primary location: [PROVIDE LOCATION INFORMATION] (the “Location”).

7. START AND END DATE. The Contractor shall start providing the Services on [START DATE] and the Services shall be completed by [COMPLETION 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 by 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]