Diamond Build Ltd v Clapham Park Homes Ltd [2008] EWHC 1439 (TCC)

CPH invited Diamond to tender for a refurbishment project. A LOI was entered into which provided that a standard form would be issued in due course. Work progressed, but relationships deteriorated and CPH determined the contract. Diamond said that CPH’s reasons for terminating were inaccurate and misleading and that they could not limit their liability towards Diamond as originally stated in the LOI. Further, Diamond said that as they were in contract with CPH based upon the JCT IFC 2005, CPH were bound to follow the JCT rules. Diamond said that the parties had proceeded on the basis that the LOI had been abandoned and that the full JCT contract was regulating their relationship. Mr Justice Akenhead held that a simple contract had been formed. It had sufficient certainty including a commencement date, a requirement to proceed regularly and diligently, a completion date and an overall contract sum. Once the LOI was accepted, its real purpose was to cover the period up to the execution of the formal contract. However, the Judge disagreed with Diamond’s second argument and dismissed their claim because:

  1. The parties' constant references in meeting minutes to "Contract Docs to be issued" demonstrated they were still expecting the formal contract to be executed;
  2. Neither party ever stated that the LOI was being abandoned;
  3. The fact that valuations were based on tender rates and prices was neither inconsistent with the LOI which allowed overheads and profit on work carried out nor inconsistent with the parties' belief that sooner or later a formal contract would be executed.