My letter of intent has expired and I'm still working
The letter ran out weeks ago, the subcontract still isn't signed, and nobody has said anything.
Updated: . By Jack Butler-Kettle, Construction Claims Consultant.
What's happening?
Letters of intent are written to last a few weeks. They cover the time it takes to agree the subcontract. Then the negotiation stalls, the job does not, and the expiry date passes with your gangs still on site. Nothing changes on the day, so nobody notices.
What changes is the paper behind the work. Work after the expiry may still fall under the letter. It may fall under a contract formed some other way, or under no contract at all. Which applies depends on the wording and on what happens next, and each answer values and pays the work differently.
That is a legal question, and it is easier to answer while the facts are fresh. Every week you work past the date adds to the sum riding on the answer. The commercial steps do not have to wait for it.
The solution
Write to your main contractor now. Ask for the letter to be extended with a cap that covers the work ahead, or for the subcontract to be signed. From this week, record the work done after the expiry, and its cost, separately. Then value what is already done beyond the letter and reconcile it against the payments, so the figure exists whatever the legal answer.
Our Letter of Intent Loss Prevention service puts the expiry and the cap into your team's routine. One named person writes before either runs out. Letter of Intent Claim values the work already done beyond the letter and pursues the balance. Whether a contract was formed, and on what terms, goes to your solicitor with the records.
Example
Illustrative example. The scenario and figures are invented.
The facts
A roofing subcontractor's letter of intent, capped at £90,000, expired on 30 April. It is now mid-June. The subcontract has been through three versions and is still unsigned, and the work done is worth about £140,000.
What happens
- The subcontractor writes at once. It asks for the letter of intent to run to the end of August with a £220,000 cap, or for a signed subcontract.
- The site team starts a weekly record of the work done after the expiry, with its labour and material costs.
- The subcontractor measures the work done between 30 April and mid-June from the diaries and delivery tickets: £38,000.
- The main contractor extends the letter to 31 August and raises the cap to £200,000. It confirms in writing that the work since 30 April falls under the letter.
- The subcontractor puts the new cap into its cost system and the new expiry into the diary.
The outcome
The main contractor values the £38,000 of work after the expiry under the extended letter and pays it in the next cycle. Both sides sign the subcontract in August, before the extended letter runs out.