6 October 2022

Construction Focus: A solution to a problem or a problem in itself? – Polly Streather writes for the PLJ

Construction Associate, Polly Streather, recently wrote for the Property Law Journal on the use and benefit of pre-contract tools, such as letters of intent, in trying to alleviate the strain of increasing construction prices and highlighting the risks that should be considered by employers before entering into such arrangements.

Polly writes: “Once the letter of intent is in place, there is sometimes a temptation for contractors to work outside of the authorised scope or beyond the expiry date so as to keep the project on target. However, this raises problems if the final contract is never entered into and a dispute arises as to payment or such other matter.

"Although it is always advisable to enter into a building contract rather than commence work under a letter of intent or other pre-contract tool, there may be times where this is not possible for the reasons highlighted above. It is important to be aware of the risks of entering into letters of intent and undertaking (and other forms of pre-contract tool), and to weigh these against the benefits. While such letters can often seem like a straightforward solution to the pressures arising from increasing construction prices and long lead times, they may cause unintended issues further down the line if due consideration is not given to their terms.”

The full article can be read here.

This article was first published in Property Law Journal 401 (October 2022) and is also available on lawjournals.co.uk.

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