Civil Engineering Reference
In-Depth Information
Sometimes the letter of intent is so carefully drafted that both parties are bound by it
until the work is completed, although that was almost certainly not the intention.
Letters of intent are sometimes referred to as unilateral contracts, or 'if' contracts. That is,
they are contracts formed on condition: 'If you build this wall, I will pay you £100.' If the
wall is built, I am obliged to pay the £100, but there is no contract until the condition is
fulfilled.
A letter of intent may constitute a continuing offer: 'If you start this work, we will pay
you appropriate remuneration.' Again, there is no obligation on the other party to do the
work, and if it is done, there are no express or implied warranties as to its quality.
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arise when projects are commenced using what one or possibly both parties think of as a
letter of intent.
Ivory Gate engaged Hall & Tawse to carry out refurbishment and redevelopment works.
ItwasintendedthatthecontractshouldbeinJCT80formwithContractor'sDesignedPor-
tion Supplement and heavily amended clause 19. The tender provided for two stages. In
view of the need to start work on site as soon as possible, Ivory Gate sent a letter of intent
to Hall & Tawse agreeing to pay 'all reasonable costs properly incurred . . . as the result
of acting upon this letter up to the date you are notified that you will not be appointed'.
The letter proceeded to explain the work required and evinced an intention to enter into a
contract in a specified sum.
Agreement was not quickly reached and Ivory Gate sent a further letter of intent. What
was envisaged was that work would commence, contract details would be finalised and
the signed building contract would be held in escrow (a situation where the effectiveness
of the contract is subject to a condition being fulfilled). Unfortunately the contract docu-
ments were never completed. The terms of the second letter of intent were quite detailed,
expressing the intention to enter into a formal contract but, pending that time, instructing
the building contract Works to commence, materials to be ordered and Hall & Tawse to act
on instructions issued under the terms of the building contract. Previous letters of intent
weresuperseded,andHall&Tawseweretobepaidallreasonablecoststogetherwithafair
allowance for overheads and profits if the works did not proceed. Two copies of the letter
were provided, and Hall & Tawse were to sign one copy and return it. They neither signed
nor returned the copy.
Theprojecttookaboutninemonthslongerthanwasplanned.Liabilitywasdisputed,and
therefore the money due to Hall & Tawse was also disputed. At the time of the trial, the
work was nearing completion. The judge referred to the second letter of intent as a provi-
sional contract and said that it had been made when Hall & Tawse accepted the offer con-
tained in it by starting work on site. The second letter of intent enabled the contract admin-
