What Is Your Purpose for Your Letter of Intent?

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).

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