Letter of Intent
A preliminary document signaling one party's intent to enter a contract with another, sometimes authorizing limited early work, ordering long-lead materials, starting mobilization, ahead of a fully negotiated and signed contract. The parties' actual binding obligations depend heavily on how the letter itself is worded, not on what either side assumes it means.
Why it matters
Two letters of intent that look nearly identical can carry completely different legal weight, whether it's genuinely binding or just a statement of good-faith intent comes down entirely to its specific language, not to the fact that it exists at all.
On a real project
An owner issues a letter of intent authorizing a contractor to begin ordering long-lead structural steel immediately, explicitly stating that authorization is binding even though the full contract is still being negotiated.
Who this matters most to
A Contracts Administrator reviews a letter of intent's specific language before a Preconstruction Manager commits to any early work based on it, since the wrong assumption about its binding force can leave real costs uncovered.
Where this goes wrong
A contractor starts ordering long-lead equipment and mobilizing crews based on a letter of intent, assuming it functions like a signed contract. The letter's own language actually makes it non-binding, and the deal falls through before a final contract is ever signed, leaving the contractor holding costs with no contractual right to recover them.