As part of Nottingham City Redevelopment Plan of the East Midlands Local Authority (EMLA), the
Forest Area Redevelopment Project has been implemented after receiving the planning approval.
This project consists of a large scale 3-story shopping complex and a 15-story residential high-rise
building. The project is located near the Forest tram stop and the park and ride car park. The project
is estimated as £85m, and 76% of this capital is funded directly by the EMLA through the
government’s urban area redevelopment funds. The rest of funding will be equally contributed by
three private developers in the local area. Their funding has been agreed, but the formal contracts
are still to be signed. The shopping complex consists of a basement car park, and number of retail
stores, restaurants, cafes, and other shops. The residential high-rise building will be constructed
with 150 studio type and two-bedroom modern apartments to let as council houses. The EMLA
hopes that this redevelopment project will help regenerating the area contributing towards
sustainable community development in Nottinghamshire.
The EMLA received government funds for the project in two stages. Using the funds in stage one,
the design has already been completed by the EMLA’s private design partner who is in a five-year
strategic partnership. Their partnership contract will be expired in two months and there will be no
valid contractual terms for them to engage with the project thereafter although their design input
and project supervision will be essential. However, due to negative relationship issues in the past,
the EMLA is not going to extend their partnership contract. Therefore, the negotiation for a new
contract for this project is currently in progress. At the meantime, the EMLA has issued a letter of
intent for them to provide any design input and project supervision from the end date of their
partnership contract until a new contract is signed.
The construction works have been split into two separate projects – i.e., the construction of the
shopping complex and the residential high-rise building. Both projects are awarded to two largescale national contractors. Both contractors wish to sub-contract some of the structural works, doors
and windows, service supplies, cleaning, and landscaping works to local sub-contractors. The
negotiations for both contracts are still in progress, but it may take more time due to rigid
conditions that are given by both contractors as well as the EMLA without any flexibility. However,
due to the urgency of completing this project based on the government’s funding restrictions, two
letters of intent have been issued to both contractors for mobilising and ordering materials up to
£120,000 in each project. These letters of intent indicate “if the contract is not concluded the
contractor’s entitlement will be limited to the proven costs incurred according to the letter of intent”.
QA3UG – Assessment Brief Framework – Final Year (NQF Level 6) Page 4 of 11
The first contractor completed purchasing of materials for the initial phase of the shopping complex
and started the construction works. However, the negotiation between the EMLA and this contractor
was failed and came to a deadlock. The EMLA wishes to terminate the contractor, and states that
the contractor has gone beyond the scope of the letter of intent. They have been analysing their
legal position for this termination and the amount to be paid.
The second contractor ordered materials from a supplier to deliver in four steps for constructing the
residential high-rise building. The fourth delivery was delayed, and the material quality was also
very poor. The EMLA rejected the materials and confirmed that they would not pay to the second
contractor who ordered these materials. They would also claim liquidated damages for the delay, but
the second contractor disagreed. This contractor had also employed their workforce in other ongoing
projects and thus failed to deploy skilled and competent workforce for this project. This may
adversely influence the quality of the work and thus future building defects may be predicted.
Despite this situation, the EMLA is going to issue another letter of intent to this contractor to
commence the construction works of the residential high-rise building. This is due to the funding
pressure because the private developers have also warned to correct the situation immediately to
secure their funds (N.B.: all names and identities used in this case study are arbitrary selected for
the learning purpose).
Task
Assume you have been appointed as the Professional Quantity Surveyor (PQS) for this project. You
are required to produce a two-part contract practice report to the EMLA.
For the first part (Part A), you are advising the EMLA critically analysing their approach of
continuing the project with letters of intent without signing the contracts and making
recommendations for resolving the current problems and continuing with the project without delay.
Your report should address the aspects such as the nature and types of letters of intent, how to
write letters of intent, potential benefits and drawbacks of letters of intent to both client and the
contractors, challenges for dealing with any claims, the recommendations on how best to minimise
any risks associated with the use of letters of intent, and the best solutions to resolve the current
problems.
For the second part (Part B), you are to critically evaluate two mechanisms for securing the interest
of third parties associated with this project and the potential third-party issues that can be
predicted. Your report should evaluate the need for the mechanisms to secure the right of third
parties associated with this construction project, and the mechanisms for protecting such rights
(e.g., collateral warranties, legislation on third-party rights) including how these have been
influenced by the UK legislation. Your report should recommend the most suitable mechanism(s) for
protecting the interest of the EMLA with respect to the third parties associated with this project.