Ireland: Letters Of Intent – A Word Of Caution

The Irish courts have a history of incorporating certain terms into construction contracts. Lynch Roofing Systems v Bennett & Son Limited [1999] 2 IR 450  and McCrory Scaffolding Limited v McInerney Construction Limited [2004] 3 IR 592 are two examples of circumstances where arbitration agreements were incorporated by reference and by habitual dealing respectively. Two recent decisions in the United Kingdom, even though of only persuasive authority, provide additional reasons for caution to builders, developers and construction professionals in Ireland when negotiating contracts and commencing works by way of letters of intent.

Arcadis Consulting (UK) Ltd v AMEC Ltd [2016]

This case raised two principal questions:

  1. whether or not the parties had entered into a legally binding contract in connection with the design of a car park, and
  2. whether the parties had agreed to cap the liability of the claimant.

Formation of a contract

The claimant, Arcadis Consulting (UK) Ltd ("Arcadis"), was employed by the defendant, AMEC (BSC) Ltd ("AMEC"), in connection with two large projects in anticipation of a wider agreement between the parties, which never materialised. The work was completed by Arcadis by way of extensions to the financial limits agreed under a series of letters of intent sent to Arcadis by AMEC. Work on one of the projects, a car park, turned out to be defective, resulting in the car park having to be rebuilt costing tens of millions of pounds.

Mr Justice Coulson held that a simple contract was created, and noted, that in normal circumstances, arrangements evidenced by letter of intent are a form of simple contract. Mr Justice Coulson commented that the substantial amount of work completed on the basis of instructions given to Arcadis by AMEC, which was in turn accepted by Arcadis, was a key factor in holding that a contract had existed. There was also no attempt to insert "subject to contract" in any correspondence.

Limitation on liability

After deciding that a simple contract was in place between the two parties, Mr Justice Coulson held that there had been no final and unqualified expression of agreement to the terms proposed by the other party in the course of negotiations. These negotiations involved exchanging significant amounts of documents in an attempt to agree to detailed terms and conditions. Mr Justice Coulson held that acceptance of proposed terms must be clear and unequivocal and that they had not been identified, were not accepted or were incomplete.

The effect of the above analysis was that the parties had not agreed any cap on the liability of Arcadis, despite the fact that every set of proposed terms of appointment discussed by the parties contained some form of cap. Failure to reach agreement on any cap on liability had the consequence that no limit was placed on the liability of Arcadis. Although the Court described this outcome as "harsh", this provides a stark reminder of the need to ensure that agreement is reached on a cap on a contracting party's liability. This is essential as a failure to reach agreement may result in a court concluding that there is a contract between the parties but that the contract does not contain any cap on the liability of the parties.

Further examples of missing key terms from a letter of intent

The above provides an example of terms that can be missed, inadvertently or otherwise, in a letter of intent. Another example of this was seen in Ampleforth Abbey Trust v Turner & Townsend Project Management Ltd [2012]. The High Court considered whether a project management company was at fault by proceeding with a project without putting a formal contract in place with the contractors. The project was significantly delayed and a dispute arose with the contractors, Kier, as to liability for liquidated damages in the sum of £750,000. Kier relied on the fact that no building contract had been entered into and negotiated a settlement whereby the claimants and Kier did not pursue each other for any further sums or damages due to the delay.

The claimants commenced proceedings against the defendants. They argued that the defendants were liable for allowing all of the works to be undertaken by Kier in the absence of a building contract expressly incorporating liquidated damages for delay. The claimants argued that the defendants had failed to exercise reasonable care and skill or to comply with the standards and practice of the construction industry. The Court described a project manager as the representative of the employer for the purpose of co-ordinating the different aspects of the project, who must act as a guardian of the client's interests. 

The Court held that by proceeding on the basis of a letter of intent only, the defendants put the claimants at real risk because there were no detailed provisions covering the works and, in particular, no agreed provision for compensation in the event of a delay. The Court ordered the defendants to pay damages.

Spartafield Ltd v Penten Group Ltd [2016] EWHC 2295

The Court went a step further in this case. It held that a contract had replaced a letter of intent, despite the fact that the contract had not been properly executed.

During the tender process, the JCT Intermediate Contract with Contractor's Design 2011 was identified as the form of contract. Once the tender had been awarded, works were authorised up to the full contract sum. Although the majority of terms were agreed, Penton did not sign the contract as there were fears concerning delays in completing the works. Costs exceeded the contract sum, and Penton sought to rely on the letter of intent to wind down the work. Spartafield argued this termination was unlawful. It argued that all essential terms of the contract had been agreed, and the conduct of the parties was consistent with the performance of the JCT contract.

The letter of intent anticipated a formal contract being entered into in due course, but did not impose a condition that this contract had to be formally executed, and all key terms had been agreed. The Court held that the JCT contract applied and the cessation of works by Penton was unlawful.

UK Supreme Court interpretation

This mirrored the approach taken by the UK Supreme Court in RTS Flexible Systems Ltd v Molkerei Alois Müller [2010]. In that case, it was held that a written contract between the parties was in existence in the form of draft text that was never executed. The work commenced on the construction project in question on the basis of a letter of intent. The letter of intent had a term of two months, which was subsequently verbally extended for a further two-month period. The total price had been agreed and instalments had been paid to the contractor. In the Court's view the essential terms had been negotiated and concluded in correspondence between the lawyers on each side.


Arcadis and Spartafield were both decided in October of last year. These two contrasting decisions show that the meaning and effect of the term 'letter of intent' will depend on the circumstances of each case. They are only of persuasive authority in Ireland and the approach to contractual interpretation in Ireland means that the Courts will ascertain the intentions of the parties from: (i) the language used, considered in light of the surrounding circumstances; (ii) the factual matrix; and (iii) the object of the contract.

A well-drafted letter of intent is often the pragmatic solution on a project where the early commencement of work takes priority over the conclusion of a final contract. However, it is important that the commercial intent of the parties is clearly drafted and appropriate advice is obtained.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Events from this Firm
20 Jan 2019, Conference, Dublin, Ireland

We are delighted to sponsor Airline Economics Growth Frontiers 2019 Conference taking place in the Shelbourne Hotel in Dublin from 20 to 23 January 2019.

22 Jan 2019, Seminar, Dublin, Ireland

We are delighted to invite you to our first Employment Law Top Tips seminar of 2019 on Tuesday 22 January in our offices on Barrow Street, Dublin 4.

In association with
Related Topics
Related Articles
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of

To Use you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions