Letters of Intent: Avoiding those Bear Traps*

The use of letters of intent can be fraught with difficulty. In this Insight we review the key case law on letters of intent of the past few years and seek to highlight some of the lessons that can be learned from them.

Introduction

Letters of intent are widely used in the construction industry as a way of letting procurement, site preparation or indeed construction works commence before the negotiations for the detailed construction contract have been completed.  The exact form they take varies widely but, typically, they will provide for a contractor or subcontractor to start an aspect of their work associated with the project. They often expressly provide for a cap on value¹ or a drop dead date after which the letter of intent will no longer be valid.  It is not uncommon to see such limits repeatedly increased or revised letters of intent being issued, as the contract negotiations between the parties drag on. In one case Fenwick Elliott advised on, 27 separate