A letter of intent outlining plans to set up a McDonald's hamburger restaurant in Bermuda does not constitute a contract, Attorney General Elliott Mottley told a court yesterday.

He was speaking after lawyer Mark Diel insisted that a letter from the McDonald's company to Leon Simmons, now one of the directors of Grape Bay Ltd., constituted a contract and therefore property, which is protected under the Island's Constitution.

But Mr. Mottley said: "In order for it to amount to property, it has to be enforceable contract...something which can be enforced in terms of the law.

"It's my contention that the letter which has been put forward between McDonald's and Grape Bay Ltd. does not amount to a contract.'' Mr. Mottley quoted from the letter, which confirmed "intent to enter into a restaurant agreement'' with Grape Bay.

He added: "That means, clearly, that they are saying `this is to show that our intent...the purpose of this letter, is to let you know that it's our intention that, at some time in the future, we want to enter a restaurant development agreement.' "The inference from that is that, clearly, there is no agreement.'' Mr. Mottley was speaking on the second day of a Supreme Court action brought by Grape Bay Ltd. -- which includes former Premier Sir John Swan and UBP backbencher Maxwell Burgess among its directors -- to try and overturn the Prohibited Restaurants Act, which bans fast food restaurants with a foreign flavour.

Mr. Mottley said: "When you look at the very letter itself, you see the intent of the whole document.'' And he pointed out the letter said it contained "only some of the basic terms and conditions of the offer.'' Mr. Mottley said: "This is not a contract where we have all terms set out -- they are not doing that at all.'' And he told Puisne Judge Vincent Meerabux: "You have to find as a matter of law that a contract exists, not as a matter of fact.

"It's then -- and only then -- it becomes property, a contract, an enforceable contract.'' Mr. Mottley added that "the fundamental issue'' of a contract between the two parties was agreement on royalties.

Letter of intent `no contract' He said: "That alone, if nothing else, or that combined with everything else, means there was no contract.'' Mr. Diel, who represents Grape Bay Ltd., is basing his arguments on four main points.

He is arguing that contracts with persons in Bermuda and overseas constitute property under the Constitution -- which says no-one can be deprived of property without compensation.

Another plank of the legal argument is whether a McDonald's can legally be regarded as a restaurant.

And he asked Mr. Meerabux to consider whether a ban on restaurants with overseas links was in the public interest and whether the Prohibited Restaurants Act was in line with the thrust of the Constitution.

Mr. Diel said yesterday that Grape Bay Ltd.'s McDonald's deal through a firm called Warner Group had been vetted by the Minister of Finance, the Bermuda Monetary Authority and the Attorney General's Chambers before being approved.

But Mr. Mottley said the legal action had been brought against "the legislative arm'' -- the House of Assembly.

And he said international law "respected legislatures' judgment as to what is in the public interest when deciding social and economic policy.'' Mr. Mottley added: "Bermuda, above everything else, maintains its unique status -- a status which, over the years, has attracted a large number of businesses and tourists here. That in a large part depends on the uniqueness of Bermuda.'' And he said: "Things like only having one car per household, the system where you must have an assessment number -- that's unique, that's Bermuda.

"That system applies to Bermuda, it's the uniqueness of the system -- that's why it's very important that be kept in mind throughout.'' The hearing continues.

RESTAURANT EAT