Letters intention to enter into a formal agreement,


Letters of Intent:

                    A letter of intent generally means the intention from the writer to enter into a contract in future in other words an Interim agreement that summarizes the main points of a proposed deal. In the case of BBC & AC controls Limited, the defendant forwarded a document stating its intention to enter into a formal agreement, condition of the contract, the total agreed lump sum, a spending cap and duration of work. The defendant then agreed to the document by signing it and forwarded to BBC. Since both parties accepted to the document was constituted as a contract.

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The claimant based on the document carried out initial works and sent an interim payment request to the consultant appointed by the defendant. Since BBC was not finalized with its decision over the design and materials, no formal contracts were made, and the dispute continued. But the claimant carried on with all the preliminary works.

The document which was signed by both partied does not include the phrasing “Letter of Intent” but then the parties referred the document to be the letter of intent. Since the document was called or treated by both the parties as letter of intent it gave rise to a binding contract. If both the parties agreed to the terms negotiated and singed to bring into effect it will be therefore constituted as a contract document and need not to be accepted.

In this case there was another letter of intent sent by the defendant stating to carry out the works and an increased spending cap. By the interpretation of the second letter which clearly phrased as “works” to be carried out. The work scope includes the design, procurement, installation and testing. Considering the language and intention of a letter of intent, the fact that the letter of interest must be taken into consideration. While drafting a letter of intent or a document, the use of phrases must be authenticated before signing.

if the parties indicated their agreement on the essential terms of the transaction and the matter of its subject, the purpose may be considered a control agreement. Parties may wish that the party’s purpose is legally controlled contracts. However, most transactions are not discussed until the draft of a full agreement, so the parties must be careful and use only legally binding letters. A letter of interest is useful because it usually catches many advantages as a contract drawer and retains the power to choose a party that is privileged. It should be taken into account that in this case, the defendant or the consultant did not a notification to the claimant when the works exceeded the        spending cap.

Contractual Obligation:

          The term means binding promise or obligation that comes from an agreement or contract by both the parties. On this case the letter of intent was a contract whose terms had been negotiated and which had been signed by both parties. On accepting/signing the document the claimant became contractually committed to perform the obligations imposed on it by the terms of the letter. But it also mentioned that the claimant can carry only limited works i.e., preliminary works and they cannot start the work until reaching into a formal contract agreement. If this fact is considered the claimant failed to perform their contractual obligation according to the contract terms which may be a breach of contract. Contract obligation usually depend on a particular subject of the contract. The claimant after not receiving the payments, stopped the work progress in a short notice. The Construction law states, the parties can suspend the performance if the notified payment has not been made. The contract document which is the letter of intent does not include the payment terms, but the letter of intent had a statement that during the course of drafting a formal agreement, the work executed shall be valued by the consultant and the payment will be made in accordance with the provisions of contract as set out in the invitation to tender document. When inviting tenders, a party may inadvertently create legal obligations. Since the tender bid was accepted by the defendant it formally became as a process contract, hence the clauses made in the tender documents should be taken into consideration.

The Court held that the spending cap on the contractor’s expenditure did not limit the defendant’s financial obligation as intended. Rather, the defendant had the right to terminate when the cap was reached. As the Defendant did not terminate, the claimant was entitled to continue with the works in excess of the cap and to be paid on a reasonable basis.

Quantum meruit:

          Law states in a contract to provide unpaid services, an obligation to pay a reasonable amount of money to the services requested by the defendant. If incase there is no contract quantum meruit operates within the law of unjust enrichment based on the following approaches.

·        Whether the defendant is enriched?

·        Was the enrichment at claimant’s expense?

·        Whether the enrichment is unjust?

·        Are there any defence available for the defendant?

In ACC v BBC case a legal contract has been made which is the letter of intent including the tender document clauses. Hence the ACC the claimant succeeded with a reasonable sum based on quantum meruit.

When there is an explicit contract for a particular condition and the terms of compensation for services, the claimant cannot suspend the work and resort to an action of quantum meruit. But if there is a total loss or failure in consideration the claimant has the right to seek the compensation.

TASK 2: Exemption clauses are useful legal devises to avoid or limit the risks associated with negligent business activity



Andrew Bro



Singer Cars



Exemption Clause:

                    A clause in a contract which particularize that the contracting party is limited or excluded from the liability. Since the exemption clause was more unfair, the law made changes to limit the usage of the clause. In the case of Andrew Bro and Singer cars, the defendant tried to protect stating that they did not include the requirement from Sales and Goods Act. But it was held that the defendant cannot rely upon the exemption clause since the contract made had a phrase “new car” which is a breech of contract by the defendant. The exemption clause can be taken into consideration if it was incorporated in the contract.

The Unfair contract terms 1997 outlines the rules in liability and exemption clause. The law states that the party will be responsible for the actions of business or on the business premises. And as per Unfair terms in consumer contract 1999 states the deal is unfair if there is substantial equilibrium in the contract for consumer deficiencies.

In another case Thornton v Shoe Lane Parking, the claimant thornton was not informed about the excluded liability while entering the car park. But the statutory warning was made in back of the parking ticket which is a contract offer and he accepted it by paying money. If the liability warning signs were displayed before giving an offer by the defendant, the exemption clause could have been used as a wall for the defendant’s.    

In a construction contract the court does not interfere if both the parties agree to the limited liability. Considering the case of Saint Gobain building Distribution Ltd.(IDA) v Hillmead Joinery Ltd. Incorporation the exclusion clause in which the defendant (IDA) clearly stated the liability conditions (exclusion clause) of their product which was accepted by the claimant. Hence the successor IDA had a strong defence against claim. The IDA did not breech since their products satisfied the tests conducted. If the product failed the tests, still the IDA could have been held as a successor. The incorporation of a exclusion clause in a contract can be done with a signature, with a notice or by previous dealing with party.








Task 3: Professional Negligence Law


Case: Six Continents Retail Limited v Carford Catering Limited.



          In cases of professional negligence, the claimant must prove that they owed a duty of care by the professional defendant. If the claimant wants to success, they must demonstrate that the professional defendant is not up to the standards of a reasonably competent professional. The claim will be successful if the claimant completely relies on the advice given by a professional. The four key elements for a successful negligence action or the duty of care, breach of a duty of care, causations and damage made. In tort or negligence law duty of care is considered to be the legal obligation made on an individual. Since in most of the negligence cases there might be no agreed relationship between the parties, hence the “duty of care” will be advised. For a duty of care to exist, (i) the harm should be reasonable, (ii) Must be close to the claimant and the defendant, (iii) To impose the security obligation on the defendant, it just need to be fair and reasonable. On the case of Six continents v Carford, the project managers from Six continents failed to test the fixed equipment by the Carford which was his duty of care. In first trial the project managers were found not liable since a letter was sent by the project managers to the client which was from the manufacturer regarding the installation recommendation. But, during the appeal the project manager was held since he breeched his duty of care.  The project managers should advise the clients about the future risks in the impletion of an activity.

Standard of Care: The court will determine the standard of care required to do a particular activity. Hence the defendant cannot protect him using phrase lack of knowledge in that particular activity.


                    The causation means the loss occurred due to the breach in duty of care. The claimant must prove that a loss occurred due to professional negligence which is considered to be the level of difficulty by the claimant. If the claimant had the chances to reduce his loses which he failed to do so, the claim cannot be made for the additional occurred. Similarly, if more loss occurred due to the negligent action/decision by the claimant, the loss cannot be claimed. The claimant should consider the legal cost need to pursue the case, since the amount claimed may result in a loss. Mostly the time frame given for the claim will be up to six years, but time extension maybe given the negligence became apparent in the later stage.

To establish the negligence action by a professional the claimant has to send a preliminary notice explaining the reasonable chance of the claim to be made, mentioning the financial value of the claim to the defendant. The professional defendant must acknowledge the notice in 21 days.

After investigating the negligence, the claimant should send a letter of claim to the defendant stating the detailed reason for the claim indicating the professional negligent including the calculation of the claim. The defendant should acknowledge the letter of claim in 21 days and will three month of time frame to investigate the negligence claim.

Letter of response should be sent by the professional stating whether the claim is accepted or denied. If the professional agreed to the claim made, a letter of settlement should be sent for further negotiation and if it was denied the claimant has the right for court proceedings. There are alternate ways to resolve the dispute by a third-party negotiation or through mediation.

The claimant can proceed to the court but if the trial was unsuccessful the claimant must pay the professional legal cost. The court has a professional negligence pre-action protocols to be followed before entering in a trial. The protocols designed by the court are

The identify of any parties involved in the dispute;
A clear chronological summary of the facts the complaint is based on;
The allegations of wrongdoing;
An explanation of how the alleged error has caused loss; and
An estimate of the financial loss suffered, together with any supporting documents.

The causation will be mostly considered if there is a complete chain link between the negligence and the breach of duty of care.

Pure Economic loss:

                    This is a loss suffered by a claimant who does not result in any physical damage to a person or property. The categories of pure economic loss are expenditure, loss of profit, profitability or loss of some other form of financial gain. It is important to examine that whether loss is consequential or pure economic loss.


Vicarious Liability:

                    It means the employer is liable for the negligence caused by its employee during the course of employment. Vicarious liability is termed to be unjust since the defendant is responsible for the negligence which he did not commit it. Usually the tort committed during the course of employment will be due to (i) Master’s authentication is a misdemeanor or (ii) The wrong and unauthorized method is doing some action approved by the master. If the wrong act was authorized the employer, then the employer is liable. Since the employer had the degree of control over its employees for their dismissal, the employer is liable for any negligence or tort.












TASK 4: Occupier’s liability is often a forgotten legal action that can have concerns for the construction industry.


Case: Wheat V Lacon


Occupier’s liability:

                    The duty of care by the people who owned the property by rent or lease are liable for the people visiting the property. This was mentioned in the occupier’s liability 1957. The act stated for both invited and uninvited visitors example: hotel, stores, etc., into property, a common duty of care should be provided by the occupier if the occupier was bound by the contract to permit strangers into the property.

It is the responsibility of the occupier/land lord to keep the ensure well maintenance of the property. Since act 1957 does not have clear statement regarding the trespassers, a similar act was passed on 1984 just to clarify the position towards the trespassers. The following are the statements made in Occupiers Liability Act 1984


he is or should be aware of the danger
he knows or should know that people may in practice be exposed to the danger
he can reasonably be expected in all the circumstances to offer them some protection from it.

It is the duty of the occupier to provided various warning signs which means the occupier is not bound by any contract with the uninvited people entering the premises. In the case of Wheat v lacon, the defendant is liable for people visiting the premises, but the staircase was unlit, and it was not dangerous to those using it whilst taking the appropriate care. The term premises in OL ACT are meant to be both the immovable and movable structures.

Independent Contractor: – In a construction site, if there was an accident caused by a contract, the occupier will not be liable. The engineers at site will be the responsible the incident as per duty of care.

Exclusion liability:

 During the period of business hours any attempt to avoid liability for carelessness or personal injury, including breach of security obligations is not valid and any attempt to exclude responsibility for property damage is subject to fair trial as per Unfair contract terms Act 1977.

Factors to be considered by the occupier to ensure safety are,

Nature of the premises                                                                                         Nature of the danger                                                                                                      Extent of the risk                                                                                                      Gravity of possible injury                                                                                             Age of the trespasser                                                                                                                               Nature of character of entry                                                                          Foreseeability of the trespasser.