Reviewing a letter of intent

A letter of intent asks a contractor or supplier to start work before the contract is agreed, on a promise that a contract will follow and, in the meantime, that the work will be paid for up to a limit. The disputes come when the contract never follows: what terms govern the work, what is owed, whether the contractor can stop, and who owns what has been done. I review the letter of intent from whichever side instructs me and return it marked up with a written explanation of what it binds the parties to and what it leaves open, for a fixed fee of £495 in three working days.

Who this is for

Contractors, subcontractors, suppliers and developers in England and Wales asked to start or authorise construction, fit-out, engineering, manufacturing or supply work under a letter of intent while the main contract is negotiated. Both parties are businesses; where the work is construction operations, the Construction Act applies to the letter as it would to a contract.

What to look for in a letter of intent

Whether the letter is a contract, and on what terms

A letter of intent can be a contract for the work it authorises, a contract to pay for work done if the main contract is not concluded, or nothing at all, depending on its words and what follows. In RTS Flexible Systems Ltd v Molkerei Alois Muller GmbH [2010] UKSC 14 the Supreme Court held that the parties, who had carried out the whole project after a letter of intent expired without signing the contract, had made a contract on the terms of the unsigned draft. The review checks which kind of letter this is, makes it say which terms govern the work done under it, and, where the intended contract is a standard form, incorporates its payment, variation and termination provisions expressly.

The cap on spend, the scope and the expiry date

The letter should authorise defined work up to a stated sum and until a stated date. The review checks that the scope is described so the contractor knows what it may do and be paid for, that the cap covers the work the employer wants done, that the contractor is entitled to stop when the cap or the date is reached and is not obliged to continue, and that the employer can extend the cap and the date in writing rather than by conduct, because work done beyond the cap without authority is where the argument about payment starts.

Payment, the Construction Act and adjudication

Where the work is construction operations between businesses, the letter is a construction contract under Part II of the Housing Grants, Construction and Regeneration Act 1996 if it is in writing or evidenced in writing, and the Act implies a right to adjudication under section 108, stage payments where the work will last 45 days or more under section 109, and the payment notice regime, with the Scheme for Construction Contracts (England and Wales) Regulations 1998 filling gaps the letter does not cover. The review checks that the letter sets due and final dates for payment and the notice procedure, or accepts that the Scheme will apply, and that interest under the Late Payment of Commercial Debts (Interest) Act 1998 is preserved.

Design, materials, insurance and the risk that sits nowhere

A letter of intent that says only 'proceed with the work' leaves design responsibility, ownership of materials on site, insurance, health and safety and site conditions to argument. The review asks for the letter to state the standard of care, who insures the works and materials, who is the principal contractor for the purposes of the Construction (Design and Management) Regulations 2015, and that materials paid for become the employer's property on payment, so that the position is clear if the contractor leaves site.

If the main contract is never signed

The letter should say what happens if the contract is not concluded: the contractor is paid for work done and materials ordered on the basis stated, the employer receives the work and the design documents, and neither party has further obligations. The review checks the basis of payment for that case (a fair valuation, the contract rates, or cost plus), whether the contractor may recover demobilisation costs, and whether the letter obliges either party to negotiate the contract, which is not enforceable under English law as an obligation to negotiate in good faith.

Termination, withdrawal and what each side keeps

Either party should be able to end the letter on notice, with the contractor paid for work done to the date of termination and the employer entitled to the work and the documents it has paid for. The review checks that the employer's right to withdraw does not leave the contractor with unpaid committed costs, that the contractor's right to stop at the cap is express, and that copyright in design documents produced under the letter is licensed to the employer on payment, so that a change of contractor does not stall the project.

What it costs

Standard review, £495. Marked-up document and a written explanation of the changes. Three working days.

Buying online forms the engagement on payment. The scope is what the contract review page describes, you accept the Terms of Service at checkout, and I email you within four working hours to get started. If you would rather ask something first, email me.

What you get

• Your own contract returned with my amendments as tracked changes, plus a clean version with every change accepted, ready to send to the other side
• Comments in the document where a point needs explaining
• A written explanation of what I have changed and why, by email or as an attachment if it is lengthy, marking the points I would hold firm on and the ones that are negotiable
• A view on what is normal market practice and what is the other side pushing their luck
• One round of follow-up questions by email, included

What is not included

• Negotiating directly with the other side, which I quote separately once I know who is on the other side. Where the other side is willing to share a live document, I can work in that document directly
• Drafting a replacement contract from scratch
• Advice on the law of any jurisdiction other than England and Wales
• Tax, accounting or regulatory advice
• Disputes about a contract that is already signed

Questions I am often asked

We have done more work than the letter's cap. Will we be paid?

Only if the employer authorised it, or the court finds a contract for the whole of the work from the parties' conduct, which is uncertain and expensive to establish. The review asks for the cap to be extended in writing before the work continues and for the contractor's right to stop at the cap to be express.

The contract never got signed and the job is finished. What governs it?

The terms the court finds the parties agreed by their conduct, which may be the unsigned draft, the letter of intent, or a reasonable sum for the work. The review looks at what the letter says for that case and, where the job is still running, recommends signing the contract or a replacement letter that says which terms apply.

Can we adjudicate under a letter of intent?

You can if the letter is a construction contract for construction operations, which most letters for building and engineering work are once evidenced in writing. The right to adjudicate is implied by the Construction Act and cannot be excluded. The review confirms the position for your letter.

Related guidance and services

• Contract review, £495, the service this page describes
• Terms and conditions drafting, £995
• Reviewing a construction subcontract from a main contractor
• Reviewing heads of terms before a deal

This page is general guidance for businesses in England and Wales, not advice on your own circumstances. Last reviewed: September 2026. Email geoffrey@caesar.co.uk.