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What is LOI?
Construction projects frequently need to get started quickly, before final documents are agreed. In these
situations, the industry often uses a ‘letter of intent’ (“LOI”) as a bridging measure to allow work to proceed and
to give the parties some legal protection. The LOI is then meant to be replaced by the formal contract.
A person will issue LOI subject to certain conditions to be fulfilled by the contractor which is stopping the party
to issue a LOA/LOA or a signed contract.
What are the things we should consider in LOI?
If we need to issue LOI, the scope, time, cost and quality and terms of payments shall be clear.
If you are a contractor Quantity Surveyor, what are the important points you check in LOI??
We should assess our risks in the LOI. The key points will be scope, terms of payments, commencement date,
etc.
Why LOI is issued? If LOI is generally not binding, why parties execute works based on LOI? Do you advise your
client to use LOI, why, why not?
• The need to obtain necessary approvals and permissions.
• Anticipated delay in the preparation of a contract.
• Need to obtain long lead items of plant and equipment’s
• Client’s desire to urgently get the contractor on site.
• Need to complete the project funding arrangements
How do you make the LOI binding?
For a letter of intent to be binding, there must be the three essential elements of a contract; offer, acceptance
and consideration.
Differences between LOI and LOA
LOI is letter of intent, which Employer use to issue to express his intention to enter into a contract with the
contractor in future.
LOA is Letter of Acceptance, which is used to accept the offer given by the contractor. LOA makes reference to
the final offer given by the Contractor
LOA may form a contract as per the Law. But LOI is just an intention. However, these purposes of LOI or LOA may
change based on the content. For example, in this part of the world, LOI is used for acceptance of the price.
Difference between Letter of Award and Letter of Acceptance
Letter of Award is standstill document which may not make reference to the offer whereas Letter of Acceptance
is referring to an acceptance i.e. offer
What is Letter of Comfort?
A letter of comfort is issued by the employer to the contractor giving assurance or making comfort to the
contractor that a contract will be awarded once the employer gets the Job.
Further, every offer has an expiry date
A contractor has included a specialist subcontractor offer in his tender price and submitted for a job. Later he
comes to know that he is going to
What is meant by bespoke contract?
Bespoke contracts are specially drafted to suit the specific requirement of a particular project.
The parties to a contract may choose to draft their own agreement setting down the terms and conditions that
have been agreed. This is sometimes done on smaller jobs, but also occurs on some very large projects,
particularly those financed in special ways.
Disadvantages:
Not time tested
No familiarity
Employer will transfer risk to the contractor
Contra proferentem rule.
What are the advantages of using standard form of contracts?
• Terms and conditions of the standard forms are agreed by representative of various construction
professionals. Hence it is balanced and fair to all parties.
• Clauses in standard forms are time tested against possible flaws.
• Standard forms are familiar to all contracting parties
• Client’s legal fees will be reduced
• Ready to use forms
What are the clauses required to be amended in particular conditions?
What is Contra proferentem?
Ambiguity in a document is construed in the way least favorable to the person who prepared the document.
Schedules and any other documents forming part of the contract.
Privity of contract?
Privity of contract states that only a party to a contract can take the benefits of that contract.
Example: D is the user or consumer who purchased from C the retailer
C having purchased from B the wholesaler and
B having purchased from A, the manufacturer.
D can sue C for breach of contract but not B or A
Privity of contract prevent any liability arising between the architect and occupier without the existence of
collateral warranty
What is Contract Under Hand? what is the validity of the Contract in hand?
Contract Under hand means the contract signed only (not stamped). Liability is for 6 years
What is Contract under seal? What is the validity of the contract in seal?
Contract Under seal means the one signed and stamped. Liability is for 12 years
Contractor is liable for 6 years for the damages after DLP or 12 years