In what circumstances could a construction professional incur liability for advising an employer to proceed under a letter of intent?
Recommending an interim letter is not negligent by itself. Liability depends on the circumstances, the advice given and whether the arrangement exposes the employer to avoidable risk.
A competent adviser may recommend a letter of intent where the material terms and timetable are sufficiently settled and the employer is warned of the remaining risk
Cunningham v Collett & Farmer rejects the proposition that letters of intent are always inappropriate. The court accepted that an interim letter may be proper where scope, price, contractual terms, start and finish dates are agreed and there is a clear route to final documents. Negligence risk increases where the adviser recommends commencement while material matters remain open, fails to explain the consequences or allows the interim arrangement to continue without control.
| Issue | Position |
|---|---|
| Recommendation alone | Not automatically negligent |
| Material terms agreed | Supports a reasonable recommendation |
| Risks explained | Employer should make an informed decision |
| Open-ended arrangement | Creates avoidable professional exposure |
| Ongoing duty | Monitor expiry, cap and contract completion |
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