i-law

International Construction Law Review

LETTERS OF INTENT AND LEGAL ISSUES RELATING TO THEIR USE

JEREMY COGGINS

School of Natural & Built Environments, University of South Australia, Adelaide

I. INTRODUCTION

Letters of intent have been, and still are, a common occurrence in the construction industry as a mechanism by which to initiate works prior to the signing of a formal contract document. Although the forms and wording of letters of intent are numerous and varied, they all essentially indicate one party’s intention to award a contract to another party at some time in the future. Lake and Draetta1 define a letter of intent as “ … a precontractual written instrument that reflects preliminary agreements or understandings of one or more parties to a future contract”. For example, typical wording used may state:
“As soon as matters outstanding between us are settled, we will enter into a contract agreement with you, and in the meantime please accept this letter as an instruction to proceed with the work necessary to permit you to meet the agreed programme.”2
Where letters of intent arise on construction projects, they are written and acted upon during the period between the submission of a tender for construction works and the signing of the formal contract for the works.
Letters of intent are typically issued either by:
  • (1) an employer to a head contractor; or
  • (2) a head contractor to a subcontractor or supplier.

1. Letters of intent from an employer to a head contractor

An employer in the construction industry typically procures works on the basis of a competitive tendering system. This involves an invitation to tender being issued by the employer to a short list of contractors who subsequently submit their tenders to the employer by a specified deadline. The employer’s invitation to tender will usually make reference to a proposed set of contractual documents, including plans, specifications, contractual terms (often by reference to an industry standard form) and, sometimes, bills of quantities to which the employer wishes the successful contractor to be bound upon the award of the contract.


[2006
The International Construction Law Review

356

The rest of this document is only available to i-law.com online subscribers.

If you are already a subscriber, click Log In button.

Copyright © 2024 Maritime Insights & Intelligence Limited. Maritime Insights & Intelligence Limited is registered in England and Wales with company number 13831625 and address 5th Floor, 10 St Bride Street, London, EC4A 4AD, United Kingdom. Lloyd's List Intelligence is a trading name of Maritime Insights & Intelligence Limited.

Lloyd's is the registered trademark of the Society Incorporated by the Lloyd's Act 1871 by the name of Lloyd's.