[2016] EWHC 2509 (TCC)

In the words of the Judge, this was a classic "contract/no contract" case. Buchan, who acted as the specialist concrete subcontractor, engaged the Claimant known as "Hyder" to carry out certain design works on a car park in anticipation of a wider agreement between the parties that did not materialise. It was alleged that the car park was defective and may need to be demolished and rebuilt at significant cost. Hyder denied liability but also said that if they were liable, there was a simple contract in respect of their design works, pursuant to which their liability was capped in the sum of 610k.

The key legal principles in establishing whether or not there is a binding contract and, if so, in what terms are summarised by Lord Clarke in the case of RTS Ltd v Molkerei [2010] UKSC 38 where he noted that what mattered:

"depends not upon their subjective state of mind, but upon a consideration of what was communicated ... 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. Even if certain terms of economic or other significance to the parties have not been finalised, an objective appraisal of their words and conduct may lead to the conclusion that they did not intend agreement of such terms to be a precondition to a concluded and legally binding agreement."

This was a case where there were few disputes of fact. Indeed, the relevant events took place over 15 years ago. Buchan argued that there was no contract because the correspondence envisaged a formal Protocol agreement with detailed terms and conditions. The absence of a final Protocol agreement precluded the existence of any contractual relationship between the parties. Usually, the fact that the bargain was performed on both sides will make it unrealistic to argue that there was no intention to enter into legal relations, and difficult to submit that the contract is void for vagueness or uncertainty. And here, Mr Justice Coulson disagreed with Buchan.

This was a case where work was done and paid for on the basis of instructions from Buchan, which were accepted by Hyder. It was not a case in which any of the relevant correspondence was marked "subject to contract". Instead, works were performed on the express understanding that, if the anticipated detail contract did not come to pass, the correspondence between the parties would create a legal relationship between them and ensure that, amongst other things, Hyder would be paid for the work they undertook.

There was an instruction, and the fact that Hyder carried out the design work pursuant to that instruction evidenced a contract between the parties. The Judge therefore held that there was a binding, simple contract between the parties. This meant that the court had to go on to consider which documents were incorporated into that instruction or simple contract.

This was not straightforward. There were three competing sets of terms and conditions. The key problem for Hyder was that they had simply not accepted, in plain or any other language, any of the three sets of terms. There must be a final and unqualified expression of agreement and/or acceptance. Hyder were careful to thank Buchan for the instruction, but not to say that they accepted it (and therefore the terms). The Judge noted that Hyder did not use the word "accept" at all, even though they could have done so on two occasions. If Hyder were accepting any of the sets of terms, they needed to say so clearly and unequivocally. They wholly failed to do so.

After carefully considering the evidence, Mr Justice Coulson decided that there was too much uncertainty and too much that was not agreed for the court to conclude that the parties intended to be bound by a liability cap in the way Hyder alleged. He noted that:

"Whilst the court should always strive to find a concluded contract in circumstances where work has been performed ... the court is not entitled to rewrite history so as to incorporate into that contract express terms which were not the subject of a clear and binding agreement."

The Judge had been asked to consider whether there was an express limitation of liability clause. He recalled the words of Lord Justice Briggs in Nobahar-Cookson v The Hut Group [2016] EWCA Civ 128:

"the parties are not lightly to be taken to have intended to cut down the remedies which the law provides for breach of important contractual obligations without using clear words having that effect."

Mr Justice Coulson noted in his conclusions that the result of his analysis was that there was no limitation of Hyder's liability. This was despite the fact that every set of proposed terms and conditions included some sort of provision to that effect. Whilst the Judge acknowledged that this might be regarded as a harsh result, he felt that he was bound to conclude that:

"this was the inevitable consequence of Hyder's dilatory and often unco-operative approach to the proposed Protocol agreement and the negotiation of the terms and conditions. This case starkly demonstrates the commercial truism that it is usually better for a party to reach a full agreement (which in this case would almost certainly have included some sort of cap on their liability) through a process of negotiation and give-and-take, rather than to delay and then fail to reach any detailed agreement at all."