The Rocky Road From Letter Of Intent To Formal Contract

There is no universally accepted template for a Letter of Intent and very often parties will adopt their own bespoke form. The transition from Letter of Intent to formal contract can continue for much of the progress of the works themselves and may not always result in the execution of a formal contract. If no such contract is entered into, then a dispute may arise as to what was in fact agreed between the parties, whether such agreement amounts to a formal contract or whether the circumstances indicate that the Letter of Intent remained in force. This was the issue raised in the recent English High Court case of Spartafield v Penten Group1 decided in the Technology & Construction Court on 29 September 2016.

The facts The decision Conclusion: what it means for you The facts

In this case, works were initially carried out on the basis of a Letter of Intent anticipating a signed contract but the contract was not eventually executed. The issue to be decided by the Court was whether the Letter of Intent had been replaced by a subsequent contract in the Joint Contracts Tribunal ("JCT") Intermediate Form that was referred to in the Letter of Intent.

The Letter of Intent authorised work to proceed for a fixed sum and referred...