The main problem for writers of letters of intent is that they don’t ask why the parties are using a letter of intent.
You may not need a letter of intent at all.
What’s Your Purpose?
Is the purpose of your letter to …
- award the contract for the works to the Contractor? If so, use a letter of acceptance. This letter states that you are accepting the Contractor’s tender and creates an agreement for the Contractor to carry out all of the Works.
- settle the negotiations on the terms of that contract, or recording the provisions for the standard form? If so, use a ‘heads of terms’ document. This document lists the key ingredients for the full contract and what the parties have currently agreed eg price, works, programme, method statements, project team etc.
- incentivise the Contractor to sign the full contract? It won’t …
- say what will happen if the full contract is not signed? It shouldn’t …
- clarify the works to be carried out pending signing the full contract on the dotted line? This is the true purpose of a letter of intent.
What should you do?
Is a letter of intent the right strategy for you? It is when you have the last listed purpose in mind and when ‘there are good reasons to start work [before] the finalisation of all the contract documents‘ (see case cited below). If not, think again!
Case: Cunningham v Collett & Farmer (a firm) [2006] EWHC 148 (TCC).
