Civil Engineering Reference
In-Depth Information
was no reason why this original basis of payment should be different (the contractor
hadarguedthatitshouldbepaidonacostplusbasis).hecourtnotedthedecision
in
Sanjay Lachhani
v.
Destination Canada (UK) Ltd
(1997) that a contractor should
not be better of as a result of the failure to conclude a contract than they would have
been if their offer had been accepted.
However, where a party who has received performance seeks damages for breach of
contract,theissueislikelytobehighlyimportant.Whereacontracthasbeenformed,
it may be difficult to determine what form the contract takes. Unsurprisingly, this will
dependontherelevantfactsandcircumstances.See,forinstance,
RTS Flexible Systems
Limited
v.
Molkerei Alois Müller Gmbh & Co KG
(2010), where three courts came to
three separate conclusions as to what, if any, contract had been formed.
Where a letter of intent anticipates that, for example, a standard form of contract
will be entered into by the parties at some future date and no such contract is subse-
quently entered into, the party who has received performance will be deprived of the
protection which the terms of the standard form might otherwise have provided. he
TCC has recently held that liquidated damages provisions in a standard form con-
tract were not incorporated where the works were carried out and completed under
letters of intent which referred to that standard form: '[t]he fact that the period men-
tioned in the final letter of intent had expired does not make it necessary to imply a
full contract' (
(The Trustees of Ampleforth Abbey Trust
v.
Turner & Townsend Project
Management Limited
(2012)). Although in that case the liquidated damages provi-
sions were not enforceable, the employer was awarded damages against the project
managers based on how it would have benefitted from an executed building contract,
taking into account the risk that the contractor would not have signed the contract.
A slightly older example is the case of
Wescol Structures Ltd
v.
Miller Construction Ltd
(1998), where negotiations between the sub-contractor and both the main contrac-
tor and the employer's representatives proceeded on the basis of letters of intent. The
sub-contractor insisted in its replies to the letter of intent that the standard DOM/2
form of sub-contract would apply, whereas the employer's representatives, who wrote
the letters of intent, stated that the sub-contract would be 'back to back with the
main contract' but failed to detail any specific terms. The case, which related to pay-
ment terms, was decided on the basis of the standard form even though the standard
form was never entered into, partly because the employer had never challenged the
sub-contractor's assumption.
English law is more developed in relation to letters of intent. The leading English
authority on this point is
British Steel Corporation
v.
Cleveland Bridge & Engineering
Co
. (1984). Here, where a party commenced work on the basis of the words 'pend-
ing the preparation and issuing to you of the official form of sub-contract' contained
in a letter of intent, it was held that it was 'very difficult to see how [the plaintiff],
by starting work, bound themselves to any contractual performance'. Among other
things, neither the price, the delivery dates, nor the applicable terms of contract had
been agreed. he
RTS Flexible Systems
case came to a similar conclusion that essen-
tial agreement had been reached, despite there remaining notes as to other clauses
the parties wished and not all schedules having been agreed. None of the remaining
items was considered essential and requiring agreement before the contract could be
signed. It is worth noting that the omission of agreement as to price need not be fatal,
