LOI

 What is a Letter of Intent in Construction Contracts? Is Letter of Intent a legally binding document?

A Letter of Intent (LoI) in the context of construction is a formal document issued during the pre-contractual phase of a project. It reflects the employer’s intention to enter into a definitive agreement with a contractor and may authorize the commencement of limited preliminary work prior to the execution of the full contract.

While a LoI facilitates early engagement, it is generally not legally binding unless it explicitly states that it is intended to create enforceable obligations. In legal terms, it represents a statement of intent, not a contract, and is typically not enforceable in court unless supported by clear language and conduct.

  


KEY ELEMENTS OF A BINDING LOI:

(may differ depending on nature of business/transaction)


- Project details and defined scope of work

- Price or payment terms

- Project timelines

- Liability caps

- Conditions precedent (e.g., permits, approvals)

- Dispute resolution mechanism

- Statement of binding intent

- Authorized signatures


CAUTION:

- Avoid commencing work or incurring costs based solely on an LoI unless a formal contract is in place.           

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