Plain-language explanations of key terms — for engineers and project managers, not lawyers.
A document issued before a formal contract is signed, indicating one party's intention to enter into a contract with another. In construction, a letter of intent is sometimes issued to allow the contractor to begin work or procurement while contract negotiations continue. A letter of intent can create legally binding obligations if it is sufficiently specific, or it may be non-binding depending on its terms and the governing law. Letters of intent frequently lead to disputes about scope and payment if the formal contract is never executed.
See Delay Damages. A pre-agreed sum specified in the contract as the amount payable by the contractor for each day or week of delay beyond the contractual completion date. To be enforceable, liquidated damages must be a genuine pre-estimate of the employer's likely loss, not a penalty. If actual losses exceed the liquidated damages rate, the employer is generally limited to the liquidated damages and cannot claim actual losses. If the rate is a penalty, it may be unenforceable.
A contract where the contractor agrees to complete all works for a fixed, agreed price, regardless of the actual quantities used. The contractor bears the risk of quantity variations from those assumed at tender. FIDIC Yellow Book and Silver Book are typically used as lump sum contracts. Under a lump sum contract, the contractor must satisfy itself as to quantities and conditions before pricing.