Contract Practice Flashcards
What are some of the problems that can arise through LOIs?
LOIs can vary wildly from a simple expression of hope that a contract will be entered into to contracts in all but name.
The biggest problem with a letter of intent is that it is unlikely to provide the full advantages of a detailed contract being in place.
Those advantages include certainty as to terms, the ability to assess and manage risk, and a methodology for handling the problems that may arise during construction.
What are the risks of using Letters of Intent, and how can these be controlled?
LOIs risk scope creep or informal commitments without binding terms.
Control via clear expiry, defined scope , financial caps, and progression to a full contract ASAP.
How would you use contingency allowances to mitigate financial risk in utility procurement?
Define known risks, quantify potential costs, and agree upfront values with clients/contractors.
Include in budget and validate against risk triggers. This avoids change order delays.
Can you name any significant legal cases relevant to the dangers of LOIs?
Ampleforth Abbey Trust v Turner & Townsend Project Management (2012)
(8LOIs, no construction contract. T&T were then pursued for damages as lack of contract forced client to settle in regard to liquidated damages)
