Construction Law/LOI


Dear Sir,

I am working in the contracts team of one of the reputed construction companies. I have just issued an LOI to one of the subcontractors. The subcontractor is requesting some changes in the payment terms and conditions. Can I insist the subcontractor to submit programme or works or submit material samples even when the LOI has not been accepted by the subcontractor?

Apart from the payment terms rest is all acceptable to the subcontractor


Dear Girish,

You do not mention the form of contract nor the applicable law, so the following comments are generic.  

Something wrong here, if you are working for a reputed construction company.  Surely, surely some one could warn you about LoI's.  They are an anathema in the face of everyone, equivalent to BoQ's in Lump Sum Contracts. They are a lazy man's way of avoiding a contract while putting all the responsibility on the other party, with no promise to pay.  Look at some of the case law on LoI's.  

A LoI is not a contract, so you have no rights and no right to ask for anything.  I suggest that the subcontractor knows his risks and thus is asking for changes to delay the procedures.  Why don't you get on and finalise the contract and sign it.  

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Peter M. Elliott


First response to queries regarding extensions of time, variations orders, site instructions and payment using FIDIC and other forms of Conditions of Contract, based on English Law, and derivatives only. Anyone who needs advice about EoT should download and study the SCL Delay & Disruption Protocol before submitting a question.


Value . . .
It's unwise to pay too much, but it's unwise to pay too little. When you pay too much you lose a little money, that is all. When you pay too little, you sometimes lose everything, because the thing you bought was incapable of doing the thing you bought it to do.
The common law of business balance prohibits paying a little and getting a lot. It can't be done. If you deal with the lowest bidder, it's well to add something for the risk you run.
And if you do that, you will have enough to pay for something better.
. . . John Ruskin (1819 - 1900)
"We are too poor to buy something cheap"
.Romanian Proverb 2002
A lean compromise is better than a fat lawsuit. George Herbert (English poet 1593-1633)
I said it in Hebrew, I said it in Dutch,
I said it in German and Greek:
But I wholly forgot (and it vexes me much)
That English is what you speak!" Hunting of the Snark - Lewis Caroll
Match your presentation to the reader!
The joy of food lasts but an hour, of sleep but a day, of a woman, but a month, but the joy of a building lasts a lifetime. Syrian proverb.
Comments and observations leading to improvements in the translation of FIDIC Red & Yellow books into Romanian prior to approval by FIDIC (reference 'Preface to the Romanian edition')

Institution of Civil Engineers, Association of Chartered and Certified Accountants, Society of Construction Law, Dispute Resolution Board Foundation

B Sc(Hons) in Civil Engineering

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