FIDIC / Legal Reference: Pre-contract document
A document issued by the employer to the successful tenderer authorising it to commence a defined scope of work before the formal contract is executed. Letters of Intent are widely used in UAE construction to allow early project commencement while contract finalisation continues.
What it means in practice
A Letter of Intent typically contains: a description of the work authorised, a financial cap on expenditure, the basis of payment, and a statement that a formal contract will follow. The precise legal status of an LOI depends on its wording — some create binding contracts for the authorised scope, others are merely statements of intention.
The risk for the contractor is that contract negotiations break down after substantial work has been done under the LOI, leaving the contractor without a formal contract and reliant on the LOI’s wording for its recovery.
Where disputes arise
LOI disputes in UAE construction typically arise from: the employer failing to execute the formal contract while allowing the contractor to proceed beyond the LOI’s financial cap; or failure to agree the final contract terms — leaving the project running under the LOI indefinitely.
UAE Context
LOIs are routinely used in UAE real estate and government construction projects. UAE courts have found that some LOIs constitute binding contracts for the work authorised, obliging the employer to reimburse the contractor even if the main contract is never executed.
Related terms
Letter of Intent disputes — including reimbursement claims for work done before contract execution — are handled by e-Basel as part of our construction claims advisory services.
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