220. Letters of intent.

A letter of intent is a communication expressing an intention to enter into a contract in the future. A letter of intent may be appropriate when the price is either agreed or there is a clear mechanism in place for it to be agreed, the contract terms are, or are very likely to be, agreed and there are good reasons to start work in advance of the finalisation of all the contract documents1.

The effect of such a communication depends upon the objective meaning of the words used2. The various possibilities are: (1) it may have no binding effect