CPD Talks - Forming Contracts - Letters of Intent

In the construction industry, letters of intent (LOI) are used often. Contractors utilise this document as a valuable tool to be able to start a project while both parties work on a formal contract. Furthermore, LOIs give the contractor and workers a head start on responsibilities. Because of the time-constraint nature of the industry, these documents help with proper planning.

However, employers must remember that these documents have certain limitations. Therefore, it cannot be an alternative to a formal contract. There should be a clear understanding of how letters of intent work to avoid problems and future construction disputes.

What are letters of intent?

These are documents written by an employer to a contractor asking them to begin the project before issuing a formal contract. As the name implies, the employer intends to work with the contractor in the future. Furthermore, letters of intent describe and enumerate the expectations between both parties. It also includes how they can compromise on each party's demands.

Moreover, it’s important to note that the letters are non-binding. This means that the employer has no obligation and liability to pay the contractor if they do what the document says. It merely states that there is a desire to work with the said contractor. Additionally, these files are not offers that can be accepted.

Overall, the primary purpose of letters of intent is to ensure that there is a clear agreement between two parties about the intentions and directions of the project. All this is agreed upon while still fixing negotiations.

Course Intro

The CPD Talks - Forming Contracts - Letters of Intent course provides attendees with essential background regarding agreements between two parties. While contracts are common in the industry, there is such a thing called a letter of intent. Because of the long time it takes to create and finalise a formal contract, project partners resort to non-standard forms. These are the objectives of the programme:

• Understand the purpose of letters of intent (LOI).
• To further explain the different types of LOI.
• Learn about creating contracts that benefit both parties.

Join us as we discuss the art of forming contracts with Geraldine Fleming. Geraldine Fleming has worked in the construction industry for over 20 years, now specialising in dispute resolution. She is dual qualified, being a chartered Quantity Surveyor, and also holding a law degree. Additionally, she has been employed in preparing, defending, and negotiating claims on a wide range of projects both in the UK and overseas

Learning Plan

Through flexible learning, this programme will cover all topics that are essential to understanding contracts and letters of intent. Our speaker is a seasoned professional who represents all sectors of the industry in dispute resolution. Furthermore, Geraldine has experience working with a wide range of contracts and sub-contracts including standard and non-standard forms and regular drafting. She lectures regularly for many professional associations and has presented for CECA, RICS, RIBA, CIOB, CAB, ECA, ICE, and FIS.

Moreover, students can finish the course within one to two hours. This depends on the speaker’s length of discussions. Also, within this timeframe is the allotment of a few minutes to answer any enquiries or clarifications on letters of intent. Should there be any extensions, they won’t affect the overall schedule of the programme.

Entry Standards

There are no strict requirements when attending the CPD Talks - Forming Contracts - Letters of Intent course. Anyone can join as long as the commitment to learning is there. From students who wish to study construction in the future, to industry professionals who want to further their knowledge for projects, all are welcome.

However, it’s important to note that attendees who have a basic foundation on contracts and letters of intent may find the topic easier to understand. If you wish to make the learning process easier, you may want to read the following:

• Types of Construction Contracts
• Elements of an agreement between employers and contractors
• What to look for in a contract

Pros and Cons of LOIs

When two parties create an agreement, they use letters of intent to start immediately. Additionally, they formulate a contract along the way. This is something that many do in the industry. While it may seem like an easy task, there are certain things that employers should remember:

Advantages

• Helps with clarifying the scope and limits of the project.
• Both parties have more room for improvements and adjustments.
• Letters of intent describe regulated expectations on both sides.
• Makes room for negotiations while formulating an official contract.
• Addresses time-sensitive duties and constraints on construction projects.

Disadvantages

• Letters of intent may cause delays in the official contract.
• No legal protection.
• Unclear details of the project outcomes.
• Not legally binding.
• Absence of control in tasks.

When to use letters of intent

Contractors and employees alike should use LOIs when planning is difficult, the risk of being late, and fast purchases of materials. They can initially use a LOI as a form of agreement. However, one should keep in mind that they should not utilise these files unless needed. Here are different situations wherein you can use letters of intent:

1. Difficult negotiations between parties: There are certain situations wherein a large project becomes complex. When faced with such occasions, parties can use a LOI to be able to start the tasks immediately.
2. There is a risk of running behind the schedule: During project planning, strict timelines are given. It’s important to stick to the agreed plan and avoid unnecessary disputes. Letters of intent allow the contractor to do that. They get work done while both parties make an agreement.
3. Immediate need for materials: Projects can run out of items while in the process. Contractors use LOIs to buy materials and avoid disrupting the schedule of responsibilities. Therefore, it contributes to the overall success of the project.
4. Effective risk management: Contractors can use letters of intent to list down risks and potential hazards they would encounter on site. Because of this, they can arrange negotiations regarding the safety of all the workers. 

How to write letters of intent?

Writing LOIs should include important contents such as names, signatures of both people involved, and completion dates. As mentioned earlier, LOIs play a crucial role in avoiding delays in a project. These are given by employers to contractors, or from contractors to subcontractors. Whichever reason for the document, one should know how to make one in cases that need immediate action. Here’s how you can do it easily:

• Include the names and addresses of both parties in agreement.
• Specify the proposed work that the contractor needs to complete.
• Include any compensation the contractor would receive for their work.
• State the intended completion date or timeline schedule.
• Propose the intention of both parties to clarify that the letters of intent are non-binding. Furthermore, this means that negotiations are in good faith until they create a formal contract.
• Insert spaces for the signature and date of signing from both the employer and contractor.

Avoid contract disputes with CCM

If you’re an aspiring professional in the fields of construction or engineering, then it’s time to invest in courses that help boost your growth. The College of Contract Management (CCM) is an organisation that aims to help its students flourish and excel. Furthermore, they take pride in creating courses and programmes that are specifically created for each field.

Many people often overlook the importance of contracts and letters of intent. However, CCM focuses on the minute details of every area, giving attention to all aspects. Therefore, graduates become one of the best professionals in their chosen field. Join us today and watch your career path improve in numerous ways.

The schedule for the CPD Talks - Forming Contracts - Letters of Intent course will be available once the support staff finalises everything with our speaker. Any additional materials that the speaker can use to lecture will also be given during the live session. Furthermore, should you have any questions or clarifications, feel free to send a message through the live chat or email.