Letter of intent meaning

This checklist outlines the principal points an employer should assess, and the provisions it ought to require, to achieve a clear and binding letter of intent (LOI) on a construction project. Although the terms ‘contractor’ and ‘employer’ are used, the same approach applies to arrangements between a contractor and a sub-contractor. When drafting and negotiating an LOI, not every matter listed will be relevant; each should be considered in light of the specific circumstances. See Practice Note: Letters of intent—construction for further detail on letters of intent and, for an example of client guidance, see Precedent: Advice to clients—use of letters of intent. Key issues and clauses Parties’ particulars: Check that the employer’s and contractor’s full details are set out at the start of the LOI (including exact company names and, where appropriate, the company number) to prevent any doubt about the identity of the contracting parties. If either is within a corporate group, ensure the correct group company is named as the contracting entity... ...

A letter of intent (LOI) can be put in place before the formal agreement and signing of a building contract (or sub‑contract) so that certain design tasks and/or works may commence at an early stage as necessary and appropriate. This Checklist outlines the principal points a contractor should weigh and the drafting it ought to seek, or ask to be inserted, to secure a clear, binding letter of intent on a construction project. Although the terms ‘contractor’ and ‘employer’ are used, the same principles also apply to dealings between a contractor and a sub‑contractor. When negotiating or preparing a letter of intent, not every point listed below will be pertinent; users must assess each matter against the particular circumstances. See Practice Note: Letters of intent—construction for further guidance on letters of intent. Key issues and clauses Are the parties’ particulars fully and accurately recorded? Make sure the employer’s and contractor’s full details are set out at the start of the letter of intent (including full company...

This checklist identifies the principal points to bear in mind when preparing or assessing a pre-construction services agreement (PCSA). Remember that the content and scope of any PCSA will hinge on the services the contractor is to deliver and the expected length of the pre-construction phase. Consequently, the drafting may differ significantly. For further detail on PCSAs, see Practice Note: Pre-construction services agreements. PCSAs generally draw together aspects from several sources. Core terms are akin to those used in a letter of intent, but with added provisions to address liaising with other parties and preliminary works taking place on site. By contrast with a letter of intent, a PCSA is set out as a conventional legal agreement, with distinct sections for the parties and for recitals. A letter of intent A consultant’s appointment A building contract Key issues and clauses • Background A PCSA should include a recitals or background section that explains the basis for the appointment and the parties’...

In this issue: Standard form contracts Building safety Expert witnesses Construction industry news Daily and weekly news alerts New and updated content Construction trackers Standard form contracts CLLS publishes 2024 edition of Letter of Intent The CLLS has released the refreshed 2024 edition of its Letter of Intent. Our commentary reviews the revisions made. See News Analysis: City of London Law Society publishes 2024 edition of Letter of Intent. Court refuses declaratory relief in JCT termination payment dispute (Shaylor v Valesecure) In Shaylor Group Ltd (in administration) v Valesecure Property Ltd (in liquidation) [2024] EWHC 750 (TCC), the Technology and Construction Court declined to issue declarations regarding the contractor’s right to payment after the termination of a JCT-based contract. In doing so, the court explored noteworthy issues of contractual interpretation, including the methodology for assessing sums owed to the contractor post-termination and the impact of an ineffective assignment by the employer. See News Analysis:...

In this issue Advertising, marketing and sponsorship Contracts E-commerce International Supply of services Daily and weekly news alerts New and updated content Dates for your diary Trackers Latest Q&As Advertising, marketing and sponsorship ASA rulings—21 February 2024 The Advertising Standards Authority reviewed a complaint about a paid Facebook ad for Happyo, a behaviour programme targeting individuals with ADHD. The ASA questioned whether the ad complied with the CAP Code and if it risked discouraging necessary ADHD treatment, and the complaint was upheld. See: LNB News 21/02/2024 50. Contracts Contractor was bound by cap in letter of intent (CLS v WJG Evans) The Technology and Construction Court held that no formal construction contract was concluded for the development, leaving the parties operating under a letter of intent (LOI). As a result, the contractor’s remuneration was limited to the LOI cap, which was below its assessment of the value of the completed...

Balfour Beatty Regional Construction Ltd v Van Elle Ltd [2021] EWHC 794 (TCC) What are the practical implications of this case? This ruling illustrates the problems that can emerge when a sub-contractor (or indeed a consultant or surveyor) issues its own terms and conditions with an initial quotation for works or services, and the later agreement does not contain an effective entire agreement clause and/or leaves scope to argue that the contractual scope does not cover every aspect of the works actually undertaken on the project. The judge found—by reference to the wording of an LOI entered into after the original quotation, the terms of the sub-contract when concluded, and the parties’ conduct in invoicing—that there was a single contract. Nonetheless, practitioners should ensure inclusion of a clear entire agreement clause that expressly states previous agreements are superseded (see Practice Note: Entire agreement clauses). Alternatively, if particular elements of the works are intended to be excluded, that should be made explicit in the scope description...

Heads of terms A business purchase (the target business) typically starts with settling the key commercial points—price, structure of the deal, due diligence steps, exclusivity provisions and timetable. These points are commonly negotiated by the parties themselves, or alongside their accountants and other professional advisers, and then set out in heads of terms, sometimes called a ‘letter of intent’ or ‘memorandum of understanding’. See Practice Note: Heads of terms—share and asset purchases. Where environmental risks are known or suspected, the heads of terms might cover: providing the buyer with any existing environmental report(s) a requirement for a reliance agreement or collateral warranty, giving the buyer the benefit of those report(s) a process allowing the buyer to undertake a phase 1 environmental audit or phase 2 ground investigations headline terms for an environmental indemnity or environmental insurance What happens during the preliminary phase?...

This Practice Note sets out, step by step, how to assemble all the components of a construction contract ready for execution from the outset. In the haste to start the works, gathering the complete suite of documents that constitute the contract is sometimes overlooked, or not collated promptly. At times, works even commence before negotiations are concluded or the agreement executed, typically under a letter of intent (see Practice Note: Letters of intent—construction). This is generally unwise; it is essential to finalise the contract and to ensure a full set of documents is compiled and readily accessible to each party at all times, to support efficient and consistent contract management and administration, and to ensure issues and potential disputes can be handled effectively and smoothly throughout the works. General considerations Construction contracts are often extensive and voluminous, containing numerous technical and commercial schedules as well as a lengthy main body of conditions and contract particulars. The precise documents required to create the construction contract will be shaped by...

What is a letter of intent? Within construction and engineering projects, letters of intent enable an employer to mobilise a contractor before the employer is ready to enter the full building contract. They are often used to bridge the gap until the main contract can be finalised. The letter might simply direct the contractor to advance design and procurement for the scheme, or it may permit works to begin on site. The shape and complexity of such letters differ considerably, and vary widely. At its most basic, a letter of intent may only record a party’s present aim to enter a contract for construction works at a later date. Without more, that document amounts to no more than a non-binding expression of current intention, much like a comfort letter. However, the forms commonly used for contemporary construction arrangements are markedly more intricate and are designed to create contractual relations between the parties involved. See Turriff Construction v Regalia Knitting Mills (1971) 9 BLR 20 (not reported on LexisNexis®)...

In 2007, the City of London Law Society (CLLS) issued a model letter of intent. A copy can be found on the CLLS website. Also note that in 2024 the CLLS released an updated Letter of Intent, incorporating certain corrections to clauses that must be amended, as indicated below for ease of reference only herein...

From: [ insert name of Employer (the ‘Employer’) ] To: [ insert name of Contractor (the ‘Contractor’) ] Date: [ insert date ] Dear [ insert name of Contractor ] [ insert full project name and/or description/location of the works ] (the ‘Works’) We acknowledge receipt of your tender ([ insert reference ]) dated [ insert date ], together with [ insert details of subsequent correspondence and any other specific documents containing details of the Works ]. We are pleased to advise that, subject to terms being agreed between us, we intend to accept your offer (as set out in the documents mentioned in paragraph 1 above) and to enter into a contract with you for delivery of the Works. The proposed form of contract will be based on the [ insert form of proposed contract ], as varied by a schedule of amendments and annexures enclosed with this letter (together the ‘Contract’). ...

From: [ insert name of Employer (the ‘Employer’) ] To: [ insert name of Contractor (the ‘Contractor’) ] Date: [ insert date ] Dear [ insert name of Contractor ] [ insert full project name and/or description/location of the works ] (the ‘Works’) 1 We acknowledge receipt of your tender ([ insert reference ]) dated [ insert date ], together with [ insert details of any follow-up correspondence and any other particular documents setting out details relating to the Works ]. 2 We are pleased to advise you that, provided the terms are settled between us, we intend to take up your offer (as set out in the materials mentioned in paragraph 1 above) and form a contract with you for the execution of the Works. 3 It is proposed that the contract form will be founded on [ insert form of proposed contract ], modified by a schedule of amendments and annexures duly enclosed with this letter (together the ‘Contract’)...