#6808 - British Steel Corporation V. Cleveland Bridge And Engineering - Restitution of Unjust Enrichment BCL

British Steel Corporation v. Cleveland Bridge and Engineering

Facts

The plaintiffs (BSC), who were iron and steel manufacturers, were approached by the defendants to produce a variety of cast-steel nodes for the project. The plaintiffs prepared an estimated price based on incomplete information and sent it to the defendants by telex on 9 February 1979. After further discussions as to the appropriate specifications and technical requirements the defendants sent a letter of intent to the plaintiffs on 21 February which (i) recorded the defendants' intention to enter into a contract with the plaintiffs for the supply of cast-steel nodes at the prices itemised in the telex of 9 February, (ii) proposed that the contract be on the defendants' standard form, which provided for unlimited liability on the part of the plaintiffs in the event of consequential loss due to late delivery, and (iii) requested the plaintiffs to commence work immediately 'pending the preparation and issuing to you of the official form of sub-contract'. The plaintiffs would not have agreed to the defendants' standard form of contract and intended to submit a formal quotation once they had the requisite information. The plaintiffs did not reply to the letter of intent since they expected a formal order to follow shortly and instead they went ahead with the manufacture of the nodes.

The defendants then indicated for the first time that they required delivery in a particular sequence. There were further discussions as to the proper specifications to be met in the manufacture but no final agreement was reached. The specifications were then changed extensively by the defendants after the first castings proved to be unsatisfactory. On 16 May the plaintiffs sent the defendants a formal quotation on their standard form, quoting a significantly higher price with delivery dates to be agreed. The defendants rejected the quotation and again changed the specifications. The plaintiffs went ahead with the manufacture and delivery of the nodes and eventually, at a meeting between the parties on 1 August, the parties reached provisional agreement on the basis of the quotation given on 16 May but they were unable to agree on other contract terms such as progress payments and liability for loss arising from late delivery. By 28 December all but one of the nodes had been delivered, delivery of the remaining node being held up until 11 April 1980 due to an industrial dispute at the plaintiffs' plant. The defendants refused to make any interim or final payment for the nodes and instead sent a written claim to the plaintiffs for damages for late delivery or delivery of the nodes out of sequence.

Holding

Robert Goff LJ

Did a contract come into existence?

There can be no hard and fast answer to the question whether a letter of intent will give rise to a binding agreement: everything must depend on the circumstances of the particular case. In most cases, where work is done pursuant to a request contained in a letter of intent, it will not matter whether a contract did or did not come into existence, because, if the party who has acted on the request is simply claiming payment, his claim will usually be based on a quantum meruit, and it will make no difference whether that claim is contractual or quasi-contractual. Of course, a quantum meruit claim (like the old actions for money had and received and for money paid) straddles the boundaries of what we now call contract and restitution, so the mere framing of a claim as a quantum meruit claim, or a claim for a reasonable sum, does not assist in classifying the claim as contractual or quasi contractual. But where, as here, one party is seeking to claim damages for breach of contract, the question whether any contract came into existence is of crucial importance.

No Contract came into existence: Of course, as I have already said, everything must depend on the facts of the particular case; but certainly, on the facts of the present case (and, as I imagine, on the facts of most cases), this must be a very difficult submission to maintain. It is only necessary to look at the terms of CBE's letter of intent in the present case to appreciate the difficulties. In that letter, the request to BSC to proceed immediately with the work was stated to be 'pending the...