Which is Better: Letter of Intent or Contract?

This statement perfectly explains why letters of intent are meant to be temporary:

The execution of a contract is to be seen not as a mere aspiration but rather as fundamental. It is the contract that defines the rights, duties and remedies of the parties and that regulates their relationships. Standard-form contracts… are precise, detailed and structured documents; their elaborate nature reflects the complexities of the projects to which they relate and attempts to address the many and varied problems that can arise both during the execution of the works and afterwards. By contrast, letters of intent such as those used in the present case are contracts of a skeletal nature; they pave the way for the formal contract, once executed, to apply retrospectively to the works they have covered, but they expressly negative the application of most of the provisions of the formal contract until it has been executed. They do not protect, and are not intended to protect, the employer’s interests in the same manner as would the formal contract; that is why their ‘classic’ use is for restricted purposes. [97]

It would be extremely unusual for a construction project to proceed from commencement to completion under a letter of intent (or series of letters of intent) for these reasons. Beware!

Watch this video for a debate on the relative merits of letter of intent and no contract.

Case: Ampleforth Abbey Trust v Turner & Townsend Project Management Ltd [2012] EWHC 2137 (TCC)

Like this article?

Share on facebook
Share on Facebook
Share on twitter
Share on Twitter
Share on linkedin
Share on LinkedIn
Share on pinterest
Share on Pinterest

Leave a comment