Mirant Asia-Pacific Construction (Hong Kong) Ltd & Anor v OVE Arup & Partners International Ltd & Anor

A letter of intent creates a binding contract where the parties objectively intend to be bound. Later draft terms do not become contractual merely because work continues or one party does not object. Particularly restrictive provisions, such as liability caps and shortened limitation periods, require specific agreement where the proposed form indicates that execution is required. A contract may be partly oral and partly written, with its parties identified objectively from the documents and circumstances. A contractual notice clause requiring a formal claim may be satisfied by a letter clearly setting out the claim, without requiring arbitration proceedings or a claim form.

The claimants sought damages exceeding US$60 million after the failure of two foundations at a coal-fired power station in the Philippines. They alleged that the defendants had designed unsuitable foundations and had failed in associated inspection and ground-condition obligations.

The court determined preliminary issues concerning contract formation, incorporation of FIDIC terms, the identity of the contracting parties, the effect of a later site-work agreement, and whether a letter of 2 May 2001 constituted a formal claim under clause 17 of the proposed FIDIC conditions.

1. The Letter of Intent, signed on or about 29 May 1995, constituted a binding agreement. It incorporated the scope of work, design principles, staffing arrangements and fee basis, including the agreed fee of £3.75 million. The parties could subsequently agree further detail within that contractual framework.
2. Revisions A and B of the proposed FIDIC agreement did not supersede the Letter of Intent. The drafts were expressly for discussion, left formal party details and signatures incomplete, and were repeatedly treated by the defendants as unsigned drafts. Continued performance and payment did not establish assent to terms that materially restricted the claimants’ rights.
3. The five-year duration of liability and £4 million cap in the conditions of particular application were not incorporated. The FIDIC form required specific agreement to those restrictive provisions. In any event, the evidence did not establish agreement to them in August or December 1995, or in March 1996.
4. Objectively, the design contract was made between CEPAS and both Ove Arup & Partners (Hong Kong) and Ove Arup & Partners International Ltd. Sual Construction Corporation was not a contracting party.
5. The site-work agreement, evidenced by the proposal signed by Mr Elliott on 15 or 16 March 1996, was separate from the design contract. On its proper construction, Ove Arup had to provide an engineer to supervise the ground investigation who was competent to fulfil site foundation engineer functions, including approving ground conditions. It did not undertake an independent obligation to approve those conditions.
6. Although the FIDIC issue did not arise on the primary findings, the court held that the letter of 2 May 2001 satisfied clause 17. Read with clause 41, the clause required notification of a formal claim at the specified London address, not an arbitration notice or claim form.

First-instance decision. No prior appellate decision is stated in the judgment.