The use of letters of intent has given rise to a number of interesting  judgments recently, packed full of practical advice from the judiciary.

Classically, a letter of intent is issued to resolve the tension between the need for a design team or building contractor to start work and incomplete contract negotiations.

When last year High Court Judge Keyser QC held that Ampleforth Abbey Trust had suffered loss and damage as a result of negligence and breach of contract by Turner & Townsend Project Management, the headlines taught us that it is negligent for a project manager in TTPM’s position to allow a project to reach completion under consecutive letters of intent, without bringing the probable procurement of a signed building contract to bear with the requisite urgency and focus.

In Judge Keyser QC’s judgment, TTPM failed to take the steps reasonably required of a competent project manager for the purpose of finalising the contract between the trust and Kier, and thereby was negligent and in breach of contract.

Contracts are not a dispensable luxury

The judge held that, in particular, by approaching the situation on the basis that the repeated issue of letters of intent was a proper response to continuing difficulties regarding the execution of the contract, TTPM effectively treated the contract as a dispensable luxury.

Contracts are not a dispensable luxury for either party or their advisers, especially in the current climate where long-standing business relationships are no guarantee of ‘give and take’ when commercial pressures bite.

Lessons learnt

The decision of the Supreme Court in RTS Flexible Systems Ltd v Molkerei Alois Müller Gmbh & Co KG (UK Production)in 2010 coupled with the TTPM case teach us:

Wherever possible, agree the contract first and start work later, this gives both parties contractual certainty. If a letter of intent is issued, it is incumbent on the relevant adviser to bring the contract to bear with urgency and focus by preparing a list of impediments to entering into the contract and eliminating them methodically.

Advisers must regularly and comprehensively advise clients of the remaining impediments and the risk of continuing under a letter of intent.

The touchstone of an allegation of professional negligence is simply: The standard of the ordinary skilled man exercising and professing to have that special skill’, also named the Bolam test. It follows that advisers must advise their client to take third-party advice where appropriate.

The consequences of breaking this rule, even with the best of intentions, can be severe. Judge Keyser QC observed that TTPM’s project manager did not understand that the intended contract terms would not apply incrementally with each letter of intent and held that he should have advised the trust to take legal advice.

Even if the letter of intent says the parties have been dealing on a ‘subject to contract’ basis, this does not exclude the possibility that the necessary implication of their conduct will be that they have waived the requirement of a formal written contract. This is the case even on the express statement in the letters of intent that neither party would be bound by the intended contract, unless and until the contract was signed.

Walter Lilly & Co Ltd v Mackay [2012] EWHC 1773 (TCC) – 11/7/12

A recent judgment has ended once and for all the long-running debate over who takes a hit when both parties in a contract have contributed to delays.

Giles Patrick Cyril Mackay (1st defendant) set up a special purpose vehicle of DMW Developments (2nd defendant) to build three high-end properties in London. Separate traditional JCT contracts were ultimately placed for each of the three dwellings, the third of which was being carried out for Mr. Mackay.

In 2004, DMW appointed Walter Lilly and Company Limited (“WLC”) as main contractor to build Mr. Mackay’s luxury home. The contract value being £5.3m

Justice Akenhead described the project as “a disaster waiting to happen”, primarily because that little or no design work had been completed by the contract stage. The design, led by Mr. Mackay’s consultant design team, effectively took place during the construction phase, resulting in many severe delays to WLC’s progress of the works.

The contract completion date was 23 January 2006 but the Works did not reach Practical Completion until August 2008.

By the time of practical completion, the parties were in serious dispute in relation to matters of defects, extensions of time, payment (including loss and expense) due to WLC, and liquidated damages deducted by DMW. A substantial claim was issued by WLC, which was met by a counterclaim from DMW. The Judge held that the Claimant was entitled to the extension of time. Most of the major causes of delay were found to be design related, for which the Claimant did not have contractual responsibility.

As to alleged concurrent delay, the Judge held that where delay had two or more effective causes, one of which entitled the contractor to an extension of time, the contractor would be entitled to a full extension of time under the JCT contract. The Judge did not apportion the delays and rejected the approach of the Scottish court in City Inn Ltd v Shepherd Construction Ltd [2010]. The Judge also considered the nature of ‘global claims’ in construction cases.

When Cruse MS was formed in 2007, our vision was to develop a multi-disciplinary practice offering a range of ‘management services’ to the construction industry. Our core skills remain as chartered quantity surveyors, and construction cost managers offering our clients valuable cost advice on a variety of projects, and accounts. Our clients are as diverse as domestic home owners, main and sub contractors, commercial banks, property developers, utility companies and insolvency practitioners.

We are seeking to engage initially with an architect(s), and other construction professionals with a view to maximising the business opportunities which are created when we engage with our clients, and to offer our clients an ‘in house’ fully integrated design and cost management service.

If you are a small architects practice or freelance architect  based in the North West of England, and are seeking an opportunity to develop your business, and can see the benefits of engaging with a chartered quantity surveyor to form a small multi disciplinary architectural and quantity surveying practice. Please contact Ian at our office on 01254 248557 for an informal conversation.

We envisage that initially both disciplines shall be self funding, and capable of generating their own work loads, The vision is to build on this solid foundation, and to grow the practice to fulfil our clients requirements.

All enquiries shall be dealt with in the strictest confidence.


A Checklist.

  1. Review what was initially agreed between you, and how clear that agreement was. Scope of works, programme & costs
  2. Clarify how the other party has failed to live up to the agreement; consider to what extent you may have contributed.
  3.  Accurately assess the costs you have incurred as a consequence; consider any loss they may claim to have suffered.
  4.  Prepare and collate written evidence (e.g. contracts, correspondence, meeting minutes and witness statements). What happened and when.
  5.  Where possible, always try to negotiate an amicable resolution. Keep accurate records of negotiations including copies of letters, e-mails etc and file notes of conversations held.
  6.  Assess the other party’s ability to pay the sum involved, for example, by running a credit check (including records of outstanding county court judgments).
  7.  Take legal advice unless the dispute is straightforward.
  8.  Assess whether on ‘the balance of probabilities’ you have a strong case. How clear is the legal position and the evidence? Assess the risks of a counterclaim or losing in court.
  9.  Clarify and understand the costs and timescales involved in taking the recommended form of legal action. Is it is worth pursuing?
  10.  Consider how far you are prepared to compromise either by accepting stage payments or partial payment for a quick resolution.
  11.  Either abandon the claim, or inform the other party in writing of your intention to take legal action; always follow the appropriate procedure.
  12.  Always track progress and legal costs as the case proceeds.
  13.  Always be prepared to compromise. Accept any sensible or reasonable offers to avoid further protracted delays, further disruption to your business, the risk of court action and the inevitable rising costs.
  14.  After a successful court case, be prepared to enforce judgment to obtain payment if necessary


 The Cardinal Rules


  • try to negotiate an amicable resolution where possible
  • assess whether you have a strong case
  • decide whether you need legal and professional advice
  • be prepared for a protracted and costly process if you pursue legal action.
  • accept a reasonable offer rather than going to court
  • consider the effect on your business.


  • waste time and money pursuing someone who cannot pay
  • refuse to compromise
  • ignore the risks of losing any legal action

Cruse MS have appointed Build and Roof Intelligence Services Limited from Mellor, Blackburn as main contractor for extensive alterations and an extension to no 20 the Hazels, Wilpshire, Blackburn.

The works consist of a two storey steel framed extension to the rear of the property, and extensive remodelling to provide additional living space and a new kitchen/garden room complete with underfloor heating throughout. The first floor is being substantially altered to accommodate two new en-suite bathrooms and additional living space. The architectural design has been by provided by Sunderland Peacock Associates of Clitheroe, with the structural design by the Booth King Partnership of Ramsbottom.

Works commenced at the vacated property on Monday 28 May 2012, for a construction period of 15 weeks.

Cruse MS have been retained by the Employer to provide project management and quantity Surveying services through to completion of the project and agreement of the final account.