Legal and contractual solutions · Letters of intent
What are the advantages and disadvantages of commencing work under a letter of intent?
Early commencement, payment exposure and loss of contractual control
An interim letter can preserve a programme date, but it may leave scope, payment, liability and exit rights unresolved while expenditure increases.
Quick answer
The commercial benefit is an earlier start; the legal cost is uncertainty unless the interim arrangement defines the authorised work and payment basis
The employer may protect funding or programme dates and the contractor may secure the project and mobilise early. The disadvantages arise if the formal contract is not completed. The employer may lose negotiating control, replacement may become difficult and payment may fall to reasonable-remuneration principles. The contractor may commit labour, materials and subcontractors without clear payment rights or an agreed route for delay, defects and termination.
| Issue | Position |
|---|---|
| Employer's benefit | Earlier mobilisation and programme protection |
| Contractor's benefit | Early appointment and removal of tender competition |
| Employer exposure | Reduced control if terms remain open |
| Contractor exposure | Unclear recovery for committed cost |
| Shared risk | Disputes over payment, defects and responsibility |
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