The parties had reached agreement in outline and sought to have the contract formalised, but went ahead anyway. They now disputed whether an agreement had been created and as to its terms if so.
Held: It was unrealistic to suggest that no contract had been created. The parties initially intended that there should be a written contract between them which was executed by each and exchanged between them. As to whether the arrangement remained subject to contract: ‘the question was, objectively speaking, whether the parties’ intentions took a new turn at some stage such that they intended to be bound by the ‘final draft contract’ without the need for its formal execution.’ and ‘essentially all the terms were agreed between the parties and that substantial works were then carried out and the agreement was subsequently varied in important respects. The parties treated the agreement of 25 August as a variation of the agreement that they had reached by 5 July. Nobody suggested in August that there was no contract and thus nothing to vary. It was not until November, by which time the parties were in dispute, that points were taken as to whether there was a contract.’
Lord Clarke, set out the tests for the intention to create a contract: ‘The general principles are not in doubt. Whether there is a binding contract between the parties and, if so, upon what terms depends upon what they have agreed. It depends not upon their subjective state of mind, but upon a consideration of what was communicated between them 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.’
Lord Phillips, President, Lord Mance, Lord Collins, Lord Kerr, Lord Clarke
[2010] UKSC 14, [2010] WLR (D) 75, [2010] 3 All ER 1, (2010) 129 Con LR 1, [2010] 1 WLR 753, [2010] 2 All ER (Comm) 97, [2010] 1 CLC 388, [2010] Bus LR 776, [2010] CILL 2868, [2010] BLR 337
Bailii, WLRD, SC, SC Summary
England and Wales
Citing:
At First Instance – RTS Flexible Systems Ltd v Molkerei Alois Muller Gmbh and Co Kg (UK Productions) TCC 16-May-2008
The parties had gone ahead in performing the contract for the supply of machinery for manufacturing yoghurt pots, despite not having concluded formal agreements. . .
Cited – G Percy Trentham Ltd v Archital Luxfer Ltd CA 1993
The court discussed how it should approach the task of establishing whether a contract had been made.
Steyn LJ said: ‘Before I turn to the facts it is important to consider briefly the approach to be adopted to the issue of contract formation . .
Appeal from – RTS Flexible Systems Ltd v Molkerei Alois Muller Gmbh and Co KG CA 12-Feb-2009
The parties went ahead with performance of a contract or the provision of a substantial production line without formally completing negotiation of the contract. . .
Cited – British Steel Corporation v Cleveland Bridge and Engineering Co Ltd 1983
An ‘if contract’ is where one party makes an offer capable of acceptance on the basis that ‘if you do this for us, we will do that for you’. Often used in the construction industry.
Goff J said: ‘the question whether . . any contract has come . .
Cited – Pagnan SpA v Feed Products Ltd ChD 1987
An agreement can be enforceable as an agreement on main terms only, with the detailed terms to be agreed later. Bingham J said: ‘The Court’s task is to review what the parties said and did and from that material to infer whether the parties’ . .
Cited – Pagnan SpA v Feed Products Ltd CA 2-Jan-1987
Contractually Bound – but Further Terms to Agree
The parties had gone ahead with performance of the arrangement between them, but without a formal agreement being in place.
Held: Parties may intend to be bound forthwith even though there are further terms still to be agreed. If they then . .
Cited – J Jarvis and Sons Plc v Galliard Homes Ltd CA 12-Nov-1999
. .
Cited by:
Cited – Parties Named In Schedule A v Dresdner Kleinwort Ltd and Another QBD 28-May-2010
The defendant merchant banks resisted two group claims for annual bonuses for 2008 made by the employee claimants. They now sought summary judgment against the claims. The employer had declared a guaranteed minimum bonus pool available to make the . .
Principal Judgment – RTS Flexible Systems Ltd v Molkerei Alois Muller Gmbh and Company Kg (UK Production) No 2 – Order and Costs SC 21-Jul-2010
The main judgment had not attempted to settle all issues between the parties, and much remained to be done. Any order would not be a final one. As to costs, each party had succeeded in one respect or another, but ‘at the end of this whole process . .
Applied – Mulcaire v News Group Newspapers Ltd ChD 21-Dec-2011
The claimant, a private investigator had contracted with the News of the World owned by the defendant but since closed. He had committed criminal offences in providing information for the paper, had been convicted and had served his sentence. He . .
Cited – Dresdner Kleinwort Ltd and Another v Attrill and Others CA 26-Apr-2013
The bank appealed against judgment against it on claims by former senior employees for contractual discretionary bonuses.
Held: The appeal failed. The bank’s unilateral promise made within the context of an existing employment relationship to . .
Lists of cited by and citing cases may be incomplete.
Contract
Updated: 02 November 2021; Ref: scu.402571