http://www.isurv.

com

Advice on drafting

Use of precedents

Precedents are a useful means by which to commence drafting letters of intent. Some
precedent letters of intent are included in the related forms section. However, it is a common
mistake to use precedents without giving sufficient thought to their suitability for a particular
project or to particular issues that may need to be addressed. Precedents should only ever be
used with the greatest of care.

Audience

Letters of intent should be drafted in such a way as clearly to explain the rights and obligations
of the parties to a judge in a potential dispute. This creates certainty in the relationship of the
parties and helps to avoid future disputes.

The case of Bryen & Langley Limited v Martin Boston [2005] EWCA Civ 973 is a clear
example of the problems that can be encountered where the drafting of the letter of intent
lacks precision.

Achieving a binding contract

If the intention is to create a binding contract, the letter of intent should not be made subject to
anything, especially not conclusion of the formal contract. Even if a binding contract is not
achieved, the party doing the work may still be entitled to a reasonable sum for work done (see
British Steel Corporation v Cleveland Bridge and Engineering Co Ltd[1984] ).

Capturing the terms - heads of terms

As with any contract, it is essential to capture the agreed terms. In a letter of intent the agreed
terms should be kept simple. As a result, it should be possible to execute the letters of intent
without delay.

Use of schedules

Schedules are a very useful means of recording agreements as they stand at the date of the
letter of intent. Documents can be incorporated by reference without copies having to be
attached. However, all documents should be given a unique reference, so that there is no
uncertainty as to which document or version is being referred to. In this way, complex
negotiations involving vast amounts of paper can be reduced to a single-page schedule
attached to the letter of intent.

Break clauses

Occasionally, a client will wish to terminate a project after a letter of intent has been issued but
before formal contracts are executed. The letter of intent should be drafted to enable the client
to do so without incurring disproportionate penalties. For example, it may be considered that
the client should not have a liability for loss of profit on works not executed in such
circumstances.

Page 1.
Copyright 2019 isurv
http://www.isurv.com

Break clauses are also useful to prevent a supplier from taking advantage of a
disproportionately advantageous negotiating position. Some unscrupulous suppliers have
been known to use such a position to demand better terms than had previously been agreed.
Provided that the break clause allows the client full use of copyright material and requires the
supplier to novate all of his or her sub-contract arrangements, the client may be able to
proceed with an alternative supplier with relatively little disruption to the project. This fall-back
position addresses the potential imbalance and facilitates the successful conclusion of
negotiations.

Break clauses should only benefit the client, and should not allow the supplier to terminate at
will. Provided that the client has an obligation to reimburse the supplier's reasonable costs, this
unilateral right to terminate at will should not be considered unfair.

Page 2.
Copyright 2019 isurv