By Alexander Barthet

 Agreements to agree are fairly common in construction. Parties decide to do business with each other, shake on it, and commit to sign a formal contract in the near future.

Are They Enforceable?

Letters of intent (LOI) can be enforced if properly written so long as the essential terms of the intended agreement – price, payout terms, scope of work, duration, and a commitment to sign a contract by a date certain – are included. However, if the language of the LOI specifically states it is revocable and shall not be binding until a formal agreement is executed, then courts will generally find there has been no meeting of the minds as yet.

The Better Alternative

Letters of intent do have a benefit. They bring parties one step closer to finalizing a transaction that up to that point they may have only talked about. But there is always the possibility that such letters can be attacked as unenforceable. The better step is obviously to have the parties sign a formal agreement from the start – an agreement which contains all essential terms and makes clear that the parties intend to be bound to each other.

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