NEC SC Letter of Intent CE's

NEC3 and NEC4 Contracts Compensation Events
1

Good afternoon,

Whilst I am aware of what an Letter of Intent is and it’s purpose, until this past week, I had no experience working with one (my company being the Employer).

At the time of tender, the supplier submitted a price, which was acceptable. However due to the nature of the works and time constraints, it was deemed a LOI was to be issued in order for the procurement of long lead materials that are to be fabricated off-site.

Within the LOI, it states the intention to engage on a NEC Supply Contract.

However, once the Supplier signed the LOI, they issued a CE saying at the time of tender, they didn’t know they were going to be working on a NEC Supply Contract and therefore hadn’t allowed for the personnel to deal with the administration of the contract i.e. a QS, Commercial Manager, Planner and ‘Labour’(not yet explained what the additional labour is for).

My question, or my thought is, at the time of issuing the LOI, the Supplier was made aware of the intention of working on a NEC Supply Contract and therefore knew what they were signing up to?

The Supplier has referred to clause 60.1 (5) and (7) however there is nothing within the Goods Information to state otherwise and similarly can clause 60.1 (7) be applied as no communication was issued to the Supplier to suggest otherwise.

Your thoughts would be appreciated.

Thank you.

2

This is a stark warning of the risk to contracting parties of using letters of intent! If this became a dispute you would have the classic battle of the forms argument. It would appear that you do have a contract, the question is on what terms is this contract? The fact that at the time of tender the Supply Contract hadn’t been mentioned may be irrelevant. The LoI could be treated as a counter-offer which the Supplier may have inadvertently appear to have accepted, what is known as a contract by performance.

This said the Supplier may be able to establish a claim against you for misrepresentation i.e. you knew you were going to contract with them based on the Supply Contract but failed to mention it to them.

It would be a good idea for you to take specialist advice in relation to this matter as the answer is not clear cut and will turn on specific facts.