‘Maximum amount payable’ clause tested under a letter of intent – CLS Civil Engineering v WJG Evans (2024)

‘Maximum amount payable’ clause tested under a letter of intent – CLS Civil Engineering v WJG Evans (2024)

Our intrepid reporter, and industry expert contributor, William Brown of Fortfield & Brown, pens this article looking at contract clauses and letters of intent in the test case CLS v WJGE.




Commencing works under a ‘letter of intent’ is not uncommon in the construction industry.  Those doing business in this way need to be careful when it comes to clauses that cap the total amount payable under the letter of intent.  These clauses are extremely common!

For example, the clause might look like this:

“Under no circumstances will we be liable under this Letter of Intent to pay you more than

£150,000 plus VAT applicable in total

You will notify us in writing at least one week before you incur expenses or liabilities which would result in that figure being inadequate to compensate you for work done and orders placed in accordance with this letter.”

The exact wording above was examined by the court in the recent case of CLS Civil Engineering Limited v WJG Evans and Sons [2024] EWHC 194 (TCC).

In short, the court decided that the wording above was enforceable.  Therefore, the building contractor was not able to recover amounts in excess of the cap!  The building contractor exceeded the cap at its own risk.

Facts of the Case

I have bulletpointed out the key facts for ease of reference:

  • The project was the construction of a library, retail units and three apartments located in Narberth, Wales;
  • On 16 April 2021, CLS (the developer) issued WJGE (the building contractor) with a letter of intent. The full letter of intent is set out at paragraph 11 of the judgement;
  • The letter of intent stated that “Under no circumstances will we be liable under this Letter of Intent to pay you more than £150,000 plus VAT applicable in total”;
  • Revised letters of intent were issued as follows:
    • On 20 November 2021 – increasing the cap to £300,000;
    • On 7 March 2022 – increasing the cap to £500,000;
    • On 4 July 2022 – increasing the cap to £800,000; and
    • On 18 October 2022 – increasing the cap to £1,100,000.
  • Thereafter, WJGE issued a final valuation in the sum of £1,413,669.24.

A harsh result?

On first blush, it might seem ‘harsh’ for a developer to enforce a cap of £1.1m, when the value of work delivered on the site was £1.4m (according to the contractor’s claims consultant). 

However, when the facts of this case are carefully considered, this is not the case.

In short, the correspondence clearly showed that the contractor was acutely aware of the cap and was working to it.  The extracts below clearly demonstrate this – I have highlighted the key elements in bold:

WJGE email dated 4 July 2022

“I note our most recent valuation No 9... was in the sum of £511,027.99 net. Since the date of this Valuation up until today's date a considerable amount of work has been completed...

In total this now exceeds the current LOI limit of £500K.

Whilst waiting for the "Official Contract" to be issued for review and signing as promised in the last progress meeting and in order to maintain momentum and progress on site I request this be reviewed and increased today without delay - I trust you will give this your immediate courtesy”

            WJGE email dated 4 July 2022

“… in order to maintain momentum and progress on site I confirm receipt and accept your increased capped order value in the sum £800,000 plus VAT as described in your e-mail below and will therefore continue to work to our best endeavours up to this limit based on the contract particulars, standard JCT Intermediate Contract with no L&A damages applied as originally tendered against. If this is not acceptable then please inform me immediately.

WJGE email 18 October 2022

“As you are aware we have still not received an official JCT intermediate contract and we again find ourselves operating beyond the scope of the £800,000.00 LOI/order value which is unacceptable…

The advice previously given, as noted in my e-mail 4/7 (below) was that we should not exceed the current LOI value in any circumstances whatsoever and should we find ourselves in a position where we find ourselves exceeding then I (WJGE) have an obligation to officially write to you both to inform you of the situation that all work should stop with immediate effect until a new LOI/ increased order value be issued.”

WJGE email 2 February 2023

The advice previously given remains... we should not exceed in any circumstance, the current LOI order value

I therefore officially write to you all this morning… informing you of this situation and request that you give this your immediate attention as we're now all running at risk and the implications for us all could be catastrophic!

The wording of the letter of intent was clear.  It was understood by the contractor.  As such, I think the courts decision that the cap was enforceable, was inevitable.  The courts have no interest in rescuing parties from a bad deal.


An argument put forward by WJGE was that CLS should be estopped from contending that there was a liability cap “in circumstances where it has paid sums in excess of any liability cap in the LOI…”.

In layman’s terms, WJGE was arguing that the liability cap should not be applied because CLS had previously ignored it.

The court decided that this argument had no merit.  In the first instance, the court held that there was no evidence that CLS had ever paid monies in excess of the cap.  In any event, the court held that CLS could not be estopped from relying upon the liability cap in circumstances where WJGE had repeatedly agreed to it and relied upon it when seeking an increase in the cap (see the emails from WJGE above on this front).

In other words, WJGE’s estoppel argument just didn’t stand up to basic scrutiny.

Take aways

The message from this case is simple – if you have received a letter of intent, read it carefully.  If it contains a clause which limits the maximum amount payable, do NOT exceed this limit without express agreement well in advance.  Do NOT exceed the cap under any other circumstances.

We regularly review letters of intent for our clients.  Maximum amount payable clauses are only one of red flags we look out for!

If you have any questions on this article, feel free to drop me an email – William.Brown@FortfieldBrown.com.


About the author

William Brown is a specialist construction and procurement lawyer, who originally qualified as a civil engineer. He uses his technical knowledge of construction issues to quickly solve legal problems for his clients. As an engineer, he prides himself on providing legal advice that is commercially focused and straight to the point.

Fortfield & Brown Ltd    www.FortfieldBrown.com


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