Updated on March 21st, 2023
A subcontractor letter of intent outlines the terms of a work agreement between a subcontractor and a prime contractor. The letter is often written by the subcontractor to relay the scope of work they are willing to complete, their pay rate, and their intention to draft a subcontractor agreement. The letter may also be drafted by a prime contractor as a preliminary agreement with a subcontractor.
Commonly Used With
- Subcontractor Agreement – A definitive agreement that defines the terms by which the subcontractor will work for the contractor.
What to Include
A subcontractor letter of intent (LOI) is an informal agreement, which means that most of its terms are non-binding. However, it will usually be signed by both parties like a contract. By executing the letter, both parties affirm their intention to negotiate a definitive contract and that they are in general agreement with the proposed terms.
Identification of Both Parties
The document will need to provide the names and addresses of the contractor and subcontractor. If either party is an entity, the company or organization name will be entered.
Scope of Work
The services that the subcontractor agrees to provide will be described in enough detail to avoid any dispute over the scope of work. The start and end date of the proposed contract will also be included.
The address and, if necessary, an exact description of where the work is to be performed is also important to include.
Maybe the most important part of any work agreement is the subcontractor’s pay rate and schedule. The contractor will be charged an hourly rate, a flat rate per job, or a combination thereof. Payments may occur on a regular basis or once the work is done.
Good Faith Negotiations
An LOI will often include a clause stating that both parties agree to proceed with negotiations in good faith, meaning they’ll both make the effort to reach a final agreement.
How to use a Subcontractor LOI
Subcontractors are hired by contractors to complete all or part of a project. A subcontractor LOI may either be made by a subcontractor to show their commitment to the job, or by a contractor to present an offer.
LOI Made by Subcontractor
When a subcontractor drafts an LOI, they have often been given the job’s general information by the contractor and have discussed basic terms. In the LOI, the subcontractor will relay the scope and terms of the proposed work.
LOI Made by Contractor
If the prime contractor is making a subcontractor LOI, they may be issuing letters to multiple subcontractors to find an ideal candidate. Each letter is addressed to a specific subcontractor with a description of the proposed work and compensation included. By using LOIs, the contractor can speed up negotiations and find a subcontractor who is ready to do the job.
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SUBCONTRACTOR LETTER OF INTENT
[SENDER (e.g., SUBCONTRACTOR) NAME]
[SENDER STREET ADDRESS]
[SENDER CITY, STATE, ZIP]
[RECIPIENT (e.g., CONTRACTOR) NAME]
[RECIPIENT STREET ADDRESS]
[RECIPIENT CITY, STATE, ZIP]
RE: [LETTER SUBJECT]
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 Subcontractor 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 SUBCONTRACTOR. [SUBCONTRACTOR NAME] (the “Subcontractor”) with a mailing address of [SUBCONTRACTOR MAILING ADDRESS].
2. THE CONTRACTOR. [CONTRACTOR NAME] (the “Contractor”) with a mailing address of [CONTRACTOR MAILING ADDRESS].
3. THE SERVICES. Unless otherwise agreed to by the Parties, the Subcontractor agrees to provide the following services: [DESCRIBE SERVICES TO BE PERFORMED] (the “Services”).
4. LOCATION. The primary location for Services performed by the Subcontractor shall be: [LOCATION ADDRESS AND DETAILS] (the “Location”).
5. PAYMENT. In consideration for the Services provided, the Contractor agrees to pay the Subcontractor: [PAYMENT].
6. PAYMENT METHOD. The Subcontractor shall be paid, in accordance with Section 5, in the following manner: [PAYMENT SCHEDULE].
7. START AND END DATE. The Subcontractor shall start providing the Services on [MM/DD/YYYY] and the Services shall be completed: (check one)
☐ – By [MM/DD/YYYY].
☐ – In a reasonable time period in accordance with industry standards.
☐ – Other: [OTHER COMPLETION REQUIREMENT].
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.
9. GOVERNING LAW. This Letter shall be governed under the laws of the State of [STATE NAME].
Contractor Signature: ____________________________
Date: [MM/DD/YYYY] Print Name: [CONTRACTOR PRINTED NAME]
Subcontractor Signature: ____________________________
Date: [MM/DD/YYYY] Print Name: [SUBCONTRACTOR PRINTED NAME]