May 2012
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What's the intention?

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Letters of intent do not always serve as binding legal documents

by Brian P. McCormick
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Imagine this scenario: It's late in the afternoon, and a general contractor to whom you recently submitted a bid on a reroofing project calls you. The general contractor informs you that your company will be awarded the subcontract to perform the reroofing work. A few days later, you receive a letter of intent from the general contractor. The letter reiterates you have been awarded the subcontract and directs you to proceed with preparations for the work, including obtaining the necessary permits, ordering the required materials and preparing all relevant submittals. The letter also states a form subcontract will be forwarded to you soon for review and signature.

You do as instructed, incurring the costs of the permits, materials and preparation of the project submittals. The general contractor is anxious to get the job going, so you even perform some preliminary tear-off work while you attempt to negotiate the subcontract terms.

Ultimately, negotiations fall through because the general contractor is not willing to agree to any revisions to its standard subcontract form and you are not willing to take on the risks associated with some of the more onerous provisions in the subcontract. As a result, the general contractor decides to use another roofing contractor for the project. In this situation, can the letter of intent serve as a basis to recover the costs you have incurred thus far?

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