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A construction contract can become binding in England and Wales before anyone signs the final formal document, but that does not mean every negotiated clause is binding. Starting work while scope, payment, liability, delay and termination terms remain unsettled can leave the parties with an interim agreement that is narrower or riskier than they expected. The safest course is to agree and execute the complete contract before mobilisation. If the programme makes that impossible, use a clearly drafted, time-limited interim arrangement that states exactly what work is authorised and which terms apply.
The key question is objective: what did the parties communicate and do, and which terms did that exchange incorporate? The courts’ decisions in Arcadis v AMEC, Ampleforth Abbey Trust v Turner & Townsend and the dispute discussed by James Bessey in Building show why delaying signature can turn a routine project into a dispute about what was actually agreed.
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Why can delaying signature create such a large construction risk?
Construction projects often begin with commercial pressure: a site must be secured, enabling works must start, or a contractor’s resources are available for only a short window. The parties may sign a letter of intent, exchange emails or simply instruct work while lawyers finish a standard-form contract. That conduct can create legal obligations, but it may not create the complete bargain the parties expect.
The danger is a gap between the “deal” people believe they have made and the documents that can prove it. A formal contract normally allocates scope, price, payment dates, design responsibility, delay remedies, insurance, caps on liability, termination rights, insolvency consequences, security and dispute procedures. A short letter of intent may cover only a first package of work or a limited expenditure. If the project moves beyond that boundary without a signed variation or replacement contract, the parties may be operating under uncertain and incomplete terms.
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That uncertainty affects both sides. An employer may discover that a liquidated-damages clause, termination right or assignment mechanism was never incorporated. A contractor or consultant may find that a negotiated liability cap or payment protection was only part of a draft and never became binding.
Can a contract exist before the formal document is signed?
Yes. Signature is important evidence, but it is not an automatic prerequisite to contract formation in every construction dispute. The court examines the parties’ words and conduct objectively, including their correspondence, the documents circulated, the work performed and the commercial context.
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“It depends not upon their subjective state of mind, but upon a consideration of what was communicated between them by words or conduct, and whether that leads objectively to a conclusion that they intended to create legal relations and had agreed upon all the terms which they regarded or the law requires as essential for the formation of legally binding relations.”
That test has two separate consequences. First, the parties may have formed some contract before the final document was signed. Secondly, proving that a contract existed does not identify all the terms in it. The court must still decide which letter, draft, specification, schedule or course of conduct was incorporated and whether a disputed clause was actually agreed.
Accordingly, “no signature means no contract” is too broad, while “we discussed it, so it must apply” is equally unsafe. The evidence must show what a reasonable observer would understand the parties to have agreed at the relevant time.
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What does Arcadis v AMEC show about an unsigned agreement?
The Technology and Construction Court’s 2016 decision and the Court of Appeal’s 2018 judgment should be read together rather than reduced to the slogan that there was either “no contract” or a complete contract.
Arcadis performed consultancy work while the parties negotiated a fuller agreement and circulated several versions of terms. At first instance, the court found that the asserted cap on liability had not been agreed and could not simply be imported into the letter of intent. The Court of Appeal later analysed the interim agreement formed through the letter and the subsequent conduct, and considered which terms had been incorporated.
The practical lesson is precise: an interim contract may exist, yet a commercially important term can still be absent. A liability cap mentioned in negotiations, marked in a draft or expected to appear in the final agreement does not bind merely because the project team acted as though the whole package had been settled. Keep a controlled record of the operative document and every clause expressly incorporated into it.
What is a letter of intent actually capable of doing?
A letter of intent can authorise a defined task while the parties complete the main contract, but its effect depends entirely on its wording and the surrounding conduct. It may be intended to create a binding contract for a limited scope, or it may record an intention to contract while allowing only specified preparatory actions. It may also contain a mixture: binding provisions for payment or confidentiality alongside an expectation that the wider contract will follow.
Do not assume that a letter of intent is a miniature version of the planned standard form. Check at least:
- Scope: the drawings, specifications, packages and exclusions covered by the instruction.
- Authorised value: a fixed price, valuation basis or clear financial cap, with a process for approving additional work.
- Duration: a commencement date, expiry date or measurable completion point for the interim work.
- Applicable conditions: the named standard form, amendments, schedules and order of precedence, if any.
- Transition: how and when the formal contract will replace the interim arrangement, and what happens to work already performed.
There is no universal safe cap or wording that works for every project. A limit that is suitable for surveys may be inadequate for structural works, long-lead procurement or a package carrying design responsibility. If the parties intend the letter to be binding only for a defined package, say so expressly and stop work or obtain a written extension when that package or limit is reached.
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Which terms are most likely to cause trouble?
The following comparison is a practical review list, not a model form. It identifies the protections that commonly sit in a detailed contract but may be missing, inconsistent or only partly incorporated in an interim arrangement.
| Issue | Formal contract normally addresses | Risk if work starts under limited documents |
|---|---|---|
| Scope and value | Complete drawings, specifications, exclusions, valuation and change control | Dispute over whether later instructions were included or were extra work |
| Duration and expiry | Contract period, milestones, extensions of time and expiry mechanics | Work continues after an interim authority has ended without a clear legal basis |
| Payment | Applications, notices, valuation, withholding, final account and payment dates | Unclear entitlement, certification process or ability to withhold sums |
| Liability and insurance | Caps, exclusions, indemnities and required policies | A negotiated cap may not bind; exposure may be materially wider than expected |
| Delay | Extension-of-time rules, notice requirements and liquidated damages | No contractual liquidated-damages remedy, or no agreed method for dealing with delay |
| Termination and insolvency | Termination events, notices, payment on termination and step-in rights | Uncertainty over ending the arrangement or dealing with an insolvent counterparty |
| Security | Bonds, guarantees, parent support and their triggering conditions | A bond may not respond simply because insolvency or termination has occurred |
| Supply-chain continuity | Assignment or novation of subcontracts and supply agreements | Employer may be unable to take over critical orders after termination |
| Disputes | Adjudication, arbitration or court jurisdiction and notice procedures | Parties argue about which dispute process applies |
| Execution | Signature blocks, authority and, where required, deed formalities | Uncertainty about whether the intended limitation period or obligations attach |
What does Spartafield say about an unsigned JCT contract?
The Building account of Spartafield Ltd v Penten Group Ltd provides the counterweight to an overbroad warning about signatures. On the facts described, an amended JCT contract containing the essential terms was treated as agreed even though it had not been formally executed, and it superseded the earlier letter of intent.
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The decision does not make formal execution irrelevant. It shows that a sufficiently complete document, accepted through the parties’ communications and conduct, may become the operative agreement. Whether that happened depends on the particular amendments, the language used and what the parties did afterwards. Keep the final agreed version identifiable; circulating multiple “near-final” drafts without stating which one governs creates avoidable evidential problems.
How did Ampleforth illustrate the cost of leaving execution unresolved?
In Ampleforth Abbey Trust v Turner & Townsend Project Management Ltd, works proceeded under successive letters of intent. The employer could not recover liquidated damages from the contractor under those letters because they did not contain the necessary liquidated-damages provision. The employer did succeed in a claim against its project manager for failing to take sufficient steps to procure execution of the formal contract.
The judgment describes execution as fundamental because a contract defines rights, duties and remedies, and contrasts detailed standard forms with skeletal letters of intent. This is not a rule that every delay in signing makes a project manager liable. It is a warning to assign responsibility for closing the contract, monitor that task and escalate when work is approaching the limits of the interim arrangement.
What happens if a party becomes insolvent before the contract is signed?
Insolvency exposes the omissions in an interim arrangement quickly. A formal contract may specify termination, suspension, payment valuation, control of documents, access to site and the transfer or assignment of subcontracts and supply contracts. A short letter or correspondence-based arrangement is less likely to contain all of those mechanisms.
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Do not assume that insolvency is automatically a common-law breach. The contractual wording matters, and the parties need to distinguish an insolvency event from other defaults and from the statutory restrictions that can affect termination clauses. If the project depends on continuity of specialist suppliers, require an agreed route for assignment or novation and keep copies of orders, warranties and design information in a form that can be transferred.
Security requires the same care. A bond or guarantee may be triggered by a specified breach, notice or certified sum rather than by insolvency or termination alone. Read the security instrument together with the underlying contract: a document being issued does not guarantee that it responds to the event that has occurred.
Can an interim arrangement include delay damages?
It can, but the operative arrangement must contain an enforceable and incorporated delay provision. Ampleforth demonstrates the practical consequence of relying on letters of intent that omitted liquidated damages: the employer could not recover that contractual remedy from the contractor under those letters.
If delay protection matters before the final contract is signed, state the relevant completion date, extension-of-time mechanism, notice requirements and the agreed consequence of unexcused delay in the interim document itself. Avoid referring vaguely to “the JCT terms” unless the exact edition, amendments and incorporated clauses are identified and attached.
Does signing as a deed change the limitation period?
In England and Wales, the limitation period can differ depending on whether the building contract is a deed or a simple contract. The Supreme Court’s 25 February 2026 decision in THG Plc v Zedra Trust Company (Jersey) Ltd states that a building contract made by deed is subject to 12 years under section 8 of the Limitation Act 1980, compared with six years for a simple contract under section 5.
That does not mean adding the word “deed” or using a deed-style signature block automatically creates a deed. Execution formalities, delivery, the identity of the parties and the nature of the particular claim all matter. Obtain advice on the correct execution method for each entity and individual, and do not treat a longer limitation period as a substitute for preserving records and notifying defects promptly.
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What should you do if work must start before the full contract?
Use a deliberate interim process rather than an informal instruction. The following sequence helps keep the temporary arrangement within a known boundary:
- Identify the authorised work. Attach the current drawings, specification, programme and exclusions. Describe procurement, design and site activities precisely.
- Set the financial limit. State the price or valuation basis, an authorised maximum and who can approve additional cost. Require written approval before the limit is exceeded.
- Set an end point. Use a date, milestone or defined package, and state what happens if the final contract is not signed by then. Do not allow silence to extend the authority indefinitely.
- Name the governing terms. Attach the applicable conditions and schedules, identify amendments and include an order-of-precedence clause for conflicts.
- Deal with essential risk allocation. State liability limits, insurance, design responsibility, delay and extensions of time, payment notices, suspension, termination and dispute procedure instead of leaving them to the future contract.
- Coordinate security. Check the wording and delivery dates for bonds, guarantees and warranties, and confirm the events that trigger each instrument.
- Protect the supply chain. Record ownership and assignment rights for subcontracts, purchase orders, design files, warranties and materials paid for by the employer.
- Define the transition. Say that the formal contract will supersede the interim arrangement on execution, identify whether earlier work is treated as performed under it, and preserve accrued payment and claims rights.
- Keep an evidence trail. Issue one controlled version, record approvals and retain the emails and meeting notes that explain what was accepted. This evidence may decide which terms a court finds were incorporated.
- Escalate unresolved points. If liability, payment, delay, insolvency or security terms remain disputed, obtain construction-law advice before authorising work outside the narrowest agreed scope.
How should you compare an interim letter with the intended formal contract?
Put both documents side by side before mobilisation and mark every difference. A useful sign-off schedule should answer these questions:
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|---|---|---|
| What is authorised? | Defined package, drawings and exclusions | Full scope, design obligations and change procedure |
| How much and for how long? | Price or valuation basis, cap and expiry | Contract sum, milestones, completion and extensions |
| Which conditions apply? | Named clauses and attached amendments | Completed standard form and order of precedence |
| Who carries risk? | Express interim liability and insurance terms | Final caps, indemnities, exclusions and insurance regime |
| What if performance fails? | Payment, suspension and termination wording | Default, insolvency, termination account and step-in rights |
| What protects payment and completion? | Any bond, guarantee or delay remedy actually incorporated | Coordinated security, liquidated damages and extension provisions |
| What happens to the supply chain? | Documented ownership and assignment rights | Comprehensive novation, assignment and collateral warranty provisions |
| How are disputes resolved? | Specified process and notices | Complete adjudication, arbitration or court provisions |
| How is it executed? | Authority and signature requirements for the interim document | Correct simple-contract or deed formalities and delivery |
What is the practical bottom line for employers, contractors and consultants?
Finalise the contract before work starts whenever the programme allows. If early work is unavoidable, make the interim bargain narrow, written and operational: define the scope, value, duration, governing terms and transition, and address the protections that would otherwise sit only in the unsigned formal contract.
Do not rely on a signature date as the sole answer to contract formation, and do not assume that a contract’s existence proves every negotiated clause applies. The evidence is objective and fact-sensitive. When documents conflict, drafts are incomplete or a major risk allocation remains open, obtain England and Wales construction-law advice before authorising further work.
Frequently Asked Questions
Can an email instruction to “proceed” create a construction contract?
It can be important evidence of agreement, but its effect depends on the wording, the sender’s authority, the attached documents and the work that follows. An email that identifies only a task may support a limited interim contract rather than incorporate the full proposed standard form.
Should a letter of intent always have an expiry date?
An expiry date is not a universal legal requirement, but it makes the intended boundary visible and creates a trigger for renewal or signature of the main contract. If the date passes, continued work should be authorised expressly rather than assumed from silence.
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Keep the signed or approved letter, every incorporated attachment, the controlled drawing and specification revisions, approval emails, meeting minutes and instructions changing scope or value. A dated document register showing which version was operative when work began can be particularly valuable.
Does a 12-year deed limitation period apply to every claim on a building project?
No. The 12-year period described by the Supreme Court concerns a building contract made by deed under section 8 of the Limitation Act 1980; a simple contract is generally subject to six years under section 5. The correct period can depend on execution formalities and the legal basis of the particular claim, so it should be checked rather than assumed.
