Understanding Pre-Construction Agreements and Letters of Intent: Key Differences and Importance
Pre-construction agreements and letters of intent are crucial components in the construction process, each serving distinct purposes. While both documents often contain similar clauses and details, a service agreement typically outlines the specific services and activities involved in a construction project, forming a binding contract between the contractor and the owner. In contrast, a letter of intent may simply detail the job requirements and explain what is necessary for the project, such as materials, manpower, and hours needed. During the pre-construction phase, it is essential for the contractor and owner to discuss the contents of both the service agreement and the letter of intent with a lawyer to avoid future conflicts.
The Pre-Construction Phase
The beginning of a project between the owner and contractor generally begins before the work starts. In this pre-construction phase, the service agreement and letter of intent provide both parties with useful intermediaries, so they may engage in the important details and start the work through a plan of action. Scheduling and planning are essential to the project. Through this documentation, the legal rights and aspects of the work may prevent future problems, stop litigation in its tracks and help avoid various obstacles throughout the work. Once the job begins, both contractor and owner will know more about each stage of the project.
The Letters of Intent
There are flexible matters contained within the letters of intent. These could provide comfort and information through non-binding details with what each part should accomplish. The relationship of both the contractor and owner is often what a letter of intent may explain. The contract specifics, as well as any necessary agreed upon matters, are within the letter of intent. This could contain the scope of work, what happens in a delay and other technical details. Documentation that is not fully finalized may exist within a letter of intent along with binding and non-binding clauses.
These files generally contain certain matters specific to include the interim agreement between parties, the scope of work in the project, a form of contract, conditions and requirements, payment confidentiality of the job and application that may apply retroactively once the contract is available for signature. Any use of intellectual property may also exist in the letter of intent. The contractor and owner may review these issues together or separately, but a lawyer is often a part of the final phase to ensure the matter is valid if any binding clauses exist. He or she may need to assess the letter for any other possible problems as well.
The Service Agreement Explained
In the pre-construction phase, the project may contain a service agreement. This is similar to a letter of intent, but this document is in use after the contract sum or financial agreement is set and in agreement. The intent is to progress through the project at this point even during the formal Building Contract negotiation phase. The pre-construction service agreement normally has two stages to help the contractor earlier in the processes. The assistance comes from the engagement of the contractor in the design process, to advise on various issues and help with assessment. These matters may include the validity of the build, programming items, the risks of construction, interface problems and if a specialist is necessary.
The service agreement may come in a standard form that certain firms publish. There are key provisions available in the documentation along with certain other items that may require modification based on the situation. The pre-construction paperwork has a clearly defined scope of all services that the contractor will provide. Additional services may occur through a request of the owner if important. The other items included are the skills, diligence, compliance and amounts due to the involved contractor. If intellectual property is part of the build, this will have a provision as well.
Legal Help with the Pre-Construction Documentation
Many owners and contractors will need the services of a legal professional with letters of intent and service agreements in the pre-construction phase. It is important that all matters have a detailed section and receive the proper care and importance.
If you need any assistance in complying with the new law, please contact us through Allan Mzungu at mwamuye@mmsadvocates.co.ke or through our Office mms@mmsadvocates.co.ke.