Letters of Intent Essay Example | Topics and Well Written Essays - 2000 words

earn of Intent - Essay ExampleLetters of mark basically are a non- fertilisation statement of the future intention of the involved parties and serve as an interim condense that outlines the terms that pass on govern the relationship of the parties before execution of the legitimate contract. The legal effect of garners of intent in the construction industry is that the contractor can only be paid on quantum meruit tail end for the reasonable sue done (Furmston, Norisada and Poole 1998). The contractor or the employer can wiretap the work at anytime without a legal nonice thus no party will be able to claim any damages for delays or defective work since no legal contract has been established. Another risk of relying on the letters of intent in the construction industry is that parties may strike that a letter of intent has been replaced with a full contract after the expiry of the date of the letter thus leading to non-entitlement of payments (Furst, Ramsey, Williamson, & U ff 2012). Such documents may contain some binding provisions such as non-disclosure agreements and covenants that the parties involved should negotiate in good faith. A letter of intent can simply be referred as an expression by one party of an intention to form a legal and binding contract. In the case of Cleveland Bridge and Engineering Co v British Steel Corporation (1984), the courtyard held that a letter of intent is not binding since important elements of contract such a toll were lacking, but contractors have a right to be compensated on a reasonable basis for their work (Furmston, Norisada and Poole 1998). Advantages and disadvantages of letters of intent There are certain advantages for the use of letters of intent in UK construction industry. Though not legally binding, the letter may save the employer the costs associated with attorney payment or accounting fees in the formation of the contract (Ashworth 2012). The letter will signify an intention to visualise in to a binding contract before any substantial expenses have been incurred by twain party. The letter is usually straightforward and is useful in the contract negotiation process since it provides the opportunity to let in contract clauses such as binding terms and non-disclosure provisions. The letter will increase the confidence of two parties to the deal through establishing the time frames, expenditure and payment terms for the work activities. The letter of intent will allow the contractor the opportunity to include no shop clause that means that the employer will not allow other contractors to addict or negotiate for the same construction work (Knowles 2012). The letter allows both parties to adhere to the future contract terms such as non-completion covenants, special agreements, warranties and price (Lewison 2011). However, letters of intent suffer several disadvantages since they cannot bind the parties. Such letters may lead to double negotiation of the work thus delaying th e completion of the construction work. After signing the letter of intent, it might be difficult for the parties to negociate the substantive terms and conditions of the deal since such letters are non-binding. The employer is left at a disadvantage position by the no shop clause since he or she cannot negotiate or solicit competing offers from other potential contractors. The employer is also at risk since the contractor may dishonor his promise