Liberty Mercian Ltd v Cuddy Civil Engineering Ltd

[2013] EWHC 2688 (TCC)

One of the many questions in this case was whether the contract between Liberty and the Contractor was formed in May or July 2010. Liberty relied on the witness evidence from Mr Jones about a meeting at the Contractor’s offices on either the 6 or 7 May 2010 where a Mr Evans (of the Contractor) signed and initialled the contract documents. Mr Jones was of the view that an agreement had been reached on the terms of those contract documents. Mr Evans understood that Liberty agreed those terms and that the contract documents would subsequently be signed by Liberty.

Mr Jones in evidence said that there would have been an agreement if Liberty Mercian had signed and sent back the contract document, albeit he accepted that he was not aware of any terms which had not been agreed or were outstanding or of anything which had to be done for there to be a contract. Liberty also noted that the contract documents were signed by Mr Crabtree on behalf of Liberty on 11 May 2010. On this basis Liberty said that, in the alternative, the Contract was formed on 11 May 2010, even though there were minor amendments to the terms on or around 5 and 23 July 2010.

The Contractor accepted that unsigned contract documents were put forward by Mr Jones and signed by Mr Evans on 6 or 7 May 2010, and also that the contract documents were signed by Mr Crabtree on about 11 May 2010. However the Contractor said that it was not made aware that Mr Crabtree had signed the Contract on 11 May 2010 and that, in fact, Liberty was still in the process of checking and seeking approvals for the contract documents and so the version signed by Mr Crabtree was not dated or sent to it on 11 May 2010 or at all.

Indeed, the Contractor said that on 26 May 2010 when the contract documents were eventually sent to them, Mr Crabtree’s and Mr Evans’ signatures had been struck through and Liberty asked for a different agreement with different terms; it named a different contractor and it was to be executed as a deed and not a contract under hand. There were also changes requested to some of the terms, which led to Mr Jones sending Mr Evans five pages of the Contract on 5 July 2010 requesting that the amendments be signed, which was duly done on 5 or 6 July 2010. Further changes were then made to the identity of the Contractor which were initialled on 23 July 2010. Thus, the Contractor said that no contract was formed in May 2010 because any acceptance of the terms of the contract documents by Mr Crabtree signing it on 11 May 2010 was not communicated to them but rather those documents were sent with amended pages on 26 May 2010. It also said that the disagreement about the terms took until July 2010 to resolve. As a result the Contract was formed in July 2010 not in May 2010 but if an agreement had been formed in May 2010 it was replaced in July 2010 or varied by agreement in July 2010.

Mr Justice Ramsey found that the parties had agreed a process by which Liberty and the relevant Contractor originally intended to enter into a contract. That process involved the contract documents being signed first by the Contractor and then by Liberty shortly thereafter. At the meeting on 6 or 7 May 2010 Mr Jones provided a copy of the contract documents for Mr Evans to sign. Significantly, that in itself did not amount to an offer which was then accepted by Mr Evans when he signed them. In accordance with the agreement and in accordance with what the standard NEC3 Form of Agreement envisaged, a contract was to be entered into by the signature of both parties. Therefore the Contract was not entered into on 6 or 7 May 2010 when Mr Evans signed it. Rather the Form of Agreement signed by Mr Evans amounted to an offer which was to be accepted by Liberty, in turn, signing the Form of Agreement. The Judge referred to the rule stated in Chitty on Contracts (31st edition) at paragraph 2-045:

“The general rule is that an acceptance has no legal effect until it has been communicated to the offeror. Accordingly there is no contract where a person writes an acceptance on a piece of paper which he simply keeps…”

Here, after Mr Evans had signed the contract documents they were sent to Mr Crabtree for signature. After he had signed, there was no communication of the contract documents as signed by Mr Crabtree as an unequivocal acceptance of the terms of the Contract in the form signed by Mr Evans. Instead, Mr Jones asked Mr Evans to make changes to certain pages of the contract documents which by then had been signed by Mr Crabtree. Therefore there was a counter-offer by Liberty in sending an amended version of the contract documents to Mr Evans, seeking his acceptance of those changes. It was further clear that it was only on 5 July 2010 that Mr Jones was able to send Mr Evans the pages dealing with the amendments with a request for two directors to sign the agreement. The agreement was then signed as a deed and initialled by the Contractor first and then Liberty. It was on 6 July 2010 that the Contract was formed by the parties agreeing the terms of the contract documents. Although some corrections were made after that date, they were to give effect to what had been agreed by 6 July 2010 and were, at most, agreed variations to the previously binding agreement.