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What contract have I got myself into?
"We like your tender" said the architect, on the phone, to the contractor "and we want to give you the contract". "Great" said the contractor "can you send me your letter of intent".
I hope everyone can see the two potential problems in the very last sentence. Why does the contractor want a letter of intent rather than a full contract and does he really want to have any form of contract with the architect rather than the client!
We have discussed letters of intent over the last few issues of N&V. Letters of intent split into three groups:
(a) A pure 'comfort' letter - no contractual significance
(b) A restricted 'contract' for particular works
(c) An 'if' contract - the full contract comes into existence following a particular event
Of course there is a further possibility - an acceptance of the tender but then, whatever its title, this is not a 'letter of intent'. The letter may also be 'subject to contract' - an expression taken from the law of property, which I have addressed elsewhere in this issue.
To assist both those who write letters of intent and those who have to interpret them, the City of London Law Society have produced a standard form letter of intent and guidance note which can be downloaded from http://www.citysolicitors.org.uk/Legal_activities/default.asp?s=3&lo=3&on=6 (where you will also find the Novation Agreement and guidance note).
The second aspect of the scenario is an all too common occurrence - with whom is the contract made? There is often a problem, for example, with a company in the same name as its managing director - are you making the contract with Mr. IMA Builder or with IMA Builder Ltd.? They are different legal entities.
A recent case Michael John Construction Ltd. -v- Golledge, Childs, Carpanini and Matthews highlighted another problem - that of the unincorporated association. The JCT Intermediate contract for building a sports complex in Cardiff named the employer as 'St. Peter's RFC'. Of course, the rugby club itself has no legal personality, the contract had been signed by the fourth defendant who subsequently became a trustee. There were different trustees at the time the contract was made and when the dispute arose. This is a complicated enough problem for any judge and probably beyond the capability of most arbitrators or adjudicators. This was one of the cases referred to by Franco Mastandrea in his talk to the branch on 11 April 2006.
These problems can touch on Company law and the law of Agency and of Trusts, none of which is covered adequately in the training of arbitrators or adjudicators.
Oh yes - just to give the answers from the judgment - the trustees at the time the contract was made (first to third defendants) were personally responsible (not as bad as it first appears - the club rules indemnified the Trustees) but the Claimant could elect alternatively to pursue the agent (fourth defendant), the adjudicator could not deal with the correct identity of the employer as that dispute was not 'under' the contract.
Peter Horne