Legal Articles

What are letters of intent?

Home / Knowledge base / What are letters of intent?

Posted by Philip Harris on 28 May 2012

Philip Harris - Construction Solicitor
Philip Harris Partner & Solicitor-Advocate

Letters of intent are commonly used in the construction sector. But what exactly are they? 

They are normally used where the employer wants to start work, but for whatever reason there has not been time to finalise a formal contract with the contractor/sub-contractor, such as one of the JCT standard forms. The letter of intent gives the contractor comfort that it will be paid for its works and, in turn, allows the employer to get the contractor to start work.

There are two types of letter of intent. The first effectively creates a contract between the parties. The second does not. The general view is that there are very few advantages to using a non-contractual (and therefore non-binding) letter of intent.

A letter of intent that creates a contract (even if a basic one) gives the contractor some certainty as to when and how much he will be paid. For the employer, it also gives some certainty as to time for completion of the works, access and what terms and conditions govern the works that will be carried out, pending execution of the formal contract. If the letter of intent is non-contractual, there are no such certainties. 

For a letter of intent to be binding, it should include such matters as:

  • The agreement between the parties, preferably with provision for signature by the parties at the end of the letter.
  • The amount to be paid for the works in question.
  • What work is to be carried out.

If it is only intended to cover a certain a stage of the works, this should be clearly set out. Similarly, if payment under the letter is to be limited to a certain figure, this needs to be set out also.  

If you are the contractor, you need to keep in mind that if you carry out work beyond the scope of the letter of intent, you may have no entitlement to be paid for that additional work. You therefore need to monitor your costs/work scope carefully.

Finally, a word of warning. There is a large body of case law concerning letters of intent, which shows how often these documents are incorrectly drafted. As always, if in doubt, seek advice.

About the author

Philip Harris

Partner & Solicitor-Advocate

Philip has 30 years’ experience as a construction solicitor and advises on all aspects of construction law.

Philip Harris

Philip has 30 years’ experience as a construction solicitor and advises on all aspects of construction law.

Recent articles

30 July 2020 Rethinking the landlord / tenant relationship

We have been following the travails of the high street for over 12 months where changing shopping habits, business rates and rent increases have been contributing to a growing strain on many landlord / tenant relationships. The Covid-19 pandemic has not only turned a bad situation critical for many retailers and hospitality venues but has also turned the spotlight on the wider commercial sector too. Almost all businesses operating across the country have suffered financially to a greater or lesser extent as result of the economic downturn precipitated by the imposition of lockdown in March.

Read article
30 July 2020 Bankrupts fail in claim to have interests in land revested in them

The claim by Mr and Mrs Brake (Brake v Swift), heard in the High Court in May, to have a cottage and adjacent land revested in them under Section 283A of the Insolvency Act 1986, was set against a background of convoluted litigation extending over a number of years, described by Matthews HHJ as ‘complex’. The claimants had been made bankrupt in 2015 and the matter before the Court concentrated on whether or not the property concerned was, indeed, the claimants’ principal residence at the time of the bankruptcy.

Read article
29 July 2020 Remote witnessing of wills – a sign of the times

The law governing how a will is witnessed dates back to 1837 and for good reason. The requirement for two people (neither of whom can inherit from the will they are witnessing) to be physically present at the signing of a will is designed to, among other things, prevent fraud and the exercise of undue influence. That is, until the Covid-19 pandemic struck.

Read article
How can we help?
01926 732512