www.mybuilders.com.

sg
Your Singapore Construction Directory

1
Construction Knowledge

A. The employer is in a hurry to start work. Is there a

problem in the issue of a letter of intent?

B. If a letter of intent is issued with a limit of £20,000, is

the employer obliged to pay a higher sum after allowing
a contractor to exceed the limit?

Refer to other pages

(Source : Construction Contract Questions and Answers,

2nd Edition, David Chappel)

2
About... www.mybuilders.com.sg

3
Subscription Plans

4
 Special Rates
for
Subscription Plan Members

See next page...

5
 Advertisement

β Aluminium Composite Panel

β Aluminium Honeycomb Panel

β Aluminum Structure Panel

β Sign Panel & UV Digital Print-

ing ACP

Lai Kok Uei

Business Development Partner

(Singapore & Malaysia)

+65 9820 9182

kokuei@h2lplus.com

Xinzhong Pingqiao Town Tiantai County 317200 Taizhou Zhejiang china

6
 Advertisement
Made In Korea
Designed by Oppa

Freeberry Works Pte Ltd sales@freeberryworks.com

7
Safety Shoes

8
 For Subscription Members Only

S$29.00
S$38.00

S$33.00
S$50.00

S$34.00

9
 Construction Knowledge
A. The employer is in a hurry to start work. Is there a problem in the
issue of a letter of intent?
The idea of a letter of intent is straightforward. It tells the contractor that the employer is not in a position to enter into a contract
for the work, but that work can begin and be carried out in accordance with the drawings and specification and if the employer
has to stop the work the contractor will be paid for what has been carried out.

Letters of intent are sometimes referred to as unilateral contracts, or ‘if’ contracts. That is a contract formed on condition: ‘If you
build this wall, I will pay you £100.’ If the wall is built, I am obliged to pay the £100, but there is no contract until the condition is
fulfilled.

A letter of intent may constitute a continuing offer: ‘If you start this work, we will pay you appropriate remuneration.’ Again, there
is no obligation on the other party to do the work and, if it is done, there are no express or implied warranties as to its quality.
Hall & Tawse South Ltd v Ivory Gate Ltd is a good example of the problems that can arise when projects are commenced using
what one or possibly both parties thinks of as a letter of intent.

Ivory Gate engaged Hall & Tawse to carry out refurbishment and redevelopment works. It was intended that the contract should
be in JCT 80 form with Contractor’s Designed Portion Supplement and heavily amended clause 19. The tender provided for two
stages. In view of the need to start work on site as soon as possible, Ivory Gate sent a letter of intent to Hall & Tawse agreeing to
pay ‘all reasonable costs properly incurred . . . as the result of acting upon this letter up to the date you are notified that you will
not be appointed’. The letter proceeded to explain the work required and evinced an intention to enter into a contract in a speci-
fied sum.

The project took about 9 months longer than was planned. Liability was disputed and, therefore, the money due to Hall & Tawse
was also disputed. At the time of the trial, the work was nearing completion. The judge referred to the second letter of intent as a
provisional contract and said that it had been made when Hall & Tawse accepted the offer contained in it by starting work on site.
It enabled the contract administrator to issue any instructions provided the instructions would be valid under the terms of the
contract. The judge held that no other contract had come into existence to supplant the provisional contract and the method of
determining the amounts due to Hall & Tawse was to refer to the bills of quantities that were to have formed part of the contract.
The machinery for valuing the work was to be found in the JCT 80 contract. Under the provisional contract, Hall & Tawse were not
entitled to stop work at any time, as would have been the case under a normal letter of intent.

There were two such letters issued in this instance: one was a true letter of intent; the other was actually a contract that deter-
mined the rights and duties of the parties. Although it was intended to be provisional until a permanent contract could be execut-
ed, the absence of a subsequent permanent contract turned the provisional contract into a permanent contract. A straightforward
letter of intent would have entitled the contractor to walk off site at any time and, crucially, it would have entitled the contractor
to remuneration on a fair commercial rate basis, which might have exceeded the contract rates.

Starting work on the basis of a letter of intent or terms incorporated by reference are, therefore, clearly recipes for litigation. It is
far better for an employer and a contractor to enter at an early stage into a formal agreement in the current JCT or other form
accepted by both parties.

(Source : Construction Contract Questions and Answers,

2nd Edition, David Chappel)

10
Power Tools

11
 For Subscription Members Only

MAKITA 12V LI-ION 10MM

(3/8") DRIVER DRILL,
DF333DSAE
S$180.00

MAKITA 100MM (4") AN-

GLE GRINDER SJS-II,
1400W,
GA4041C
S$202.00

MAKITA MIXER
220MM,850W
(110V), UT2204/B
S$245.00

MAKITA DEMOLITION HAMMER

(BREAKER), 900V, HM0810A

S$270.00

Email marketing@h2lplus.com for other products pricelist.

* Delivery Charge $20 for below $200 or self collection.

12
 Advertisement

Freeberry Works Pte Ltd sales@freeberryworks.com

13
Grouting

14
 For Subscription Members Only

S$5.00 / 25kg
S$18.00 / 25kg

S$28.00 / 25kg
S$5.00 / 25kg

Email marketing@h2lplus.com for other products pricelist.

*Free delivery for order above $500
* Delivery Charge $70 for below $500 or self collection.

15
16
Hand Gloves

17
For Subscription Members Only

70g, Latex Coated

Hand Glove
$5.80 / dozen

90g, Latex Coated

Hand Glove
$6.50 / dozen

Min Order ： 10 dozens

18
Laser Distance Meter

19
LS-P Laser Distance Meter

$36.00

20
 Advertisement

Lai Kok Uei

Business Development Partner

(Singapore & Malaysia)

+65 9820 9182

kokuei@h2lplus.com

21
22
For Sales

23
 Construction Knowledge
B. If a letter of intent is issued with a limit of £20,000, is the employer
obliged to pay a higher sum after allowing a contractor to exceed the
limit?
Letters of intent commonly stipulate a maximum figure that the employer is prepared to pay. That is perfectly understandable.
The employer needs to know the extent of any financial liability. Thus, the proposed Contract Sum may be several million pounds,
but, pending final agreement on contract terms and other matters, the employer might issue a letter of intent indicating that the
contractor may proceed up to a total of £50,000 or whatever sum is deemed appropriate. The idea is that, before the contractor
completes work to that value, either the contract is agreed and executed or the work is stopped.

The problem is that, once a letter of intent is issued, both parties tend to forget what it says and simply get on with the project as

though a contract had been signed. Then something happens that concentrates minds and there is a dispute. Mowlem plc v Stena
Line Ports Ltd11 is a case in point. The letter of intent concept was taken rather far by the issue of some 14 such letters during the
course of the Works. Fortunately, the parties agreed that each letter superseded the previous one, otherwise the dispute might
have been labyrinthine in its complexity. When Mowlem commenced the carrying out of the work described in each letter, a small
contract was formed by which Stena agreed to pay Mowlem a reasonable sum. In each case, the maximum amount of each sum
was stated in the letter.

The last letter sent by Stena stipulated a maximum amount of £10 million and a date for completion. The Works were not finished
by the due date and Mowlem’s position was that the work carried out was worth more than £10 million. Mowlem maintained
that Stena had allowed it to continue the Works even though it was clear that the cost was exceeding the amount in the letter of
intent, therefore, Mowlem ought not to be bound by the amount in the letter, which should not have any effect once the sum was
exceeded. Stena contended that its professional advice was that the work done did not exceed £10 million.

The court had no hesitation in concluding that Mowlem was entitled to be paid the reasonable amounts it could substantiate un-
derthe terms of the letter of intent but such amounts could not exceed £10 million in total. It would not make commercial sense if
an agreement to a maximum sum could be set aside simply because the contractor continued to work after the due date or after
the limit had been reached.

From this it is to be concluded that letters of intent, like other contractual documents, mean what they say. Usually, if the contrac-
tor is working to a letter of intent that specifies, say, £20,000 as the limit, this figure will be exceeded at the contractor’s peril. Of
course, that is subject to the usual overriding proviso that each set of facts must be considered on its own merits. Where the
maximum is low and the eventual sum would be many times that amount, it may be held that a contractor who substantially ex-
ceeded the maximum would be entitled to payment on the basis that both parties had clearly agreed to ignore the limit and con-
tinue the Works, the failure to issue a revised letter of intent or even a formal contract being an oversight. It is suggested that this
would particularly be the case if the contractor had actually received payment above the maximum amount.

(Source : Construction Contract Questions and Answers,

2nd Edition, David Chappel)

24
Teak Timber Strip Floor

250 x 50 x 12mm thk

Estimated qty : 6000 sq ft

call 6743 6475

TEREX Dumper

call 9390 1275

25
Brought to you by
H2l Projects Pte Ltd
65 9820 9182
kokuei@h2lplus.com
26