Case summary: The court looked at whether the letter of intent in question amounted to a contract between the parties. In each case it is a question of construction whether the execution of a formal contract is a condition or term of the arrangements agreed in the letter of intent; or whether the letter is a mere expression of the desire of the parties as to the manner in which the transaction already agreed to will proceed. Even if it can be shown that a letter of intent does amount to a contract, it may not be adjudicable if it fails to satisfy the requirements of section 107 of the Housing Grants Construction and Regeneration Act 1996 (the Construction Act) - which requires that all the express terms of the agreement are in writing or evidenced in writing.
Comment: If you do not wish your letter of intent to be viewed as a contract, clearly mark the letter of intent as being “subject to contract”.
Bennett (Electrical) Services Limited v Inviron Limited (19/01/07)