We reviewed this case in Issue 197. At first instance, Mr Justice Coulson had said that this was a classic “contract/no contract” case. Buchan, who acted as the specialist concrete subcontractor, engaged Hyder to carry out 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 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. If Hyder were wrong, their potential liability could have amounted to some £40million. At first instance, the Judge held that the parties had agreed a simple contract arising out of a letter dated 6 March 2002 and that no set of terms and conditions was incorporated into the Contract. Hyder appealed.
Mr Justice Coulson had considered that in the absence of any over-arching Protocol Agreement and its terms and conditions, described as the “November terms”, the parties could not be taken to have agreed that Hyder’s liability was to be capped. There was too much uncertainty and too much that was not agreed for the court to conclude, on any objective analysis of the correspondence, that the parties intended to be bound by a liability cap.
LJ Gloster in the CA disagreed. The 6 March 2002 letter was a request to start work on all of the terms as set out in that letter of intent. It was an offer of an “if” contract. This was because, in the letter, Buchan requested Hyder to carry out a certain performance and promised Hyder that, if it did so, it would receive a certain performance in return. The letter established a fixed fee of £56,000, which was capable of being revisited. It was a standing offer which, if acted on before it lapsed or was lawfully withdrawn, would result in a binding contract.
Hyder accepted that offer. The “best evidence” that Hyder had accepted was its conduct in undertaking the work. Given that the letter of 6 March 2002 included that the work was to be carried out: “in accordance to…the Terms and Conditions associated that [the parties] are currently working under...”, the court had to determine what, if any, terms and conditions had been incorporated. Here LJ Gloster highlighted the need to distinguish between the interim contract under which the parties were currently working (the Contract) and the Final Contract, the terms of which would supersede the Contract once agreed. The parties had chosen “to stop the music” in relation to the terms that applied in the interim in relation to the Contract but not in relation to the Final Contract. Once the final terms had been agreed, they were to supersede the interim terms for the purpose of all of the projects.
The appellate Judge was clear that the reference to the “Terms and Conditions” was a reference to terms that the parties had previously exchanged and agreed to work under. On the evidence these were terms which had been agreed on a parallel project and Buchan had sent Hyder an email saying that “[w]e intend to use the documents for the Wellcome Building works subject to your agreement and we will be providing more details shortly”. The emphasis is that of LJ Gloster. This was an offer, which was accepted either by Hyder’s conduct in starting work on 13 November or by a later letter.
A feature of Mr Justice Coulson’s original judgment had been his recognition that his analysis rendered a particularly harsh result for Hyder. LJ Gloster thought that the harshness of the original result was another reason why the original decision was not correct. It goes without saying that parties should not take any comfort from these words; LJ Gloster’s decision, like that of Mr Justice Coulson, was based on an analysis of the documents said to make up the contractual relationship between the parties – an analysis that was only necessary because of the original failure to sign up to a full contract agreement in the first place.