Letters of intent—construction

The following Construction practice note provides comprehensive and up to date legal information covering:

  • Letters of intent—construction
  • What is a letter of intent?
  • Why would a letter of intent be used?
  • Legal issues arising out of letters of intent
  • Letter of intent—a binding contract?
  • Certainty of terms
  • Consequences of a non-binding letter of intent
  • Subject to contract
  • Can the letter incorporate the full contractual terms?
  • Commercial problems with letters of intent
  • More...

Letters of intent—construction

What is a letter of intent?

Letters of intent are used in construction and engineering projects to allow the employer to mobilise a contractor before the employer is in a position to enter into the full building contact. The letter may only instruct the contractor to progress design and procurement in relation to the project, or it may authorise works to be commenced on site.

Letters of intent vary in their form and complexity. A very simple letter of intent might only confirm a party's present intention to enter into a contract for construction works in the future. In the absence of anything else, such a letter forms nothing more than a non-binding statement of present intention, akin to a comfort letter. However, most forms of letter of intent used for modern construction contracts are much more complex and seek to create contractual relationships between the parties. See Turriff Construction v Regalia Knitting Mills (1971) 9 BLR 20 (not available in Lexis®Library).

Modern letters of intent usually set out the employer’s intention to enter into a contract with the contractor for construction works, and will set out the terms on which the contractor is authorised to commence works on site/undertake design work/pre-order materials etc before the main contract is executed. It is common for parties to include a limit on the value of the works

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