Letters of Intent

If doubt exists over contractual obligations, and the court has to decide the matter, the judge will usually consider what parties actually did and said.

The actual work on many projects starts after a letter of intent has been issued, with the detail of the contract left subject to further discussion and, everyone hopes, eventual agreement.

What happens if no final agreement on the written contract is ever reached, work has been done, and for some reason a dispute arises?

That is where the judge will examine what people said and did. If the parties continue to work together then the judge is likely to find that they did intend that there was some contract between them. The focus is then on deciding what the terms of the contract were. It is inevitable that one party or another will be dissatisfied with the outcome decided by the judge.

If a project it started under a letter of intent it is important that the letter of intent sets out what the parties are expected to do while negotiations on the contract take place and the letter of intent applies, what payments will be made, the length of time for which the arrangements under the letter of intent remain applicable, and what will happen if no agreement on the actual contract is reached. Ensuring that these things are defined will avoid nasty surprises later!

For more information contact Simon Daw.

Filed: 28/06/2010 12:12:54