Co-Operative Group (Cws) Ltd. (Formerly Co-Operative Wholesale Society Ltd.) v International Computers Ltd.

A commercial contract is not formed merely because parties have agreed some matters in principle or have acted as though negotiations were progressing towards an agreement. The court must determine objectively whether the parties intended to be legally bound and on what terms. It is for the parties, not the court, to decide which terms are necessary before they will be bound. If negotiations on matters regarded by either party as fundamental remain unresolved, no contract is concluded. An existing agreement continues unless discharged, but it cannot be extended to materially different work without a further binding agreement varying its scope.

The claimant succeeded to the rights and liabilities of Co-operative Retail Services Ltd. under an agreement with the defendant concerning the development of retail computer systems. Following a transfer of engagements, the parties negotiated a proposed replacement or variation concerning the GlobalSTORE project, including the introduction of loyalty-card functionality into former CRS stores.

The claimant alleged that a new contract had arisen by conduct or implication, or that the existing agreement had been replaced or varied. It claimed damages for alleged repudiatory breach, misrepresentation and consequential losses. The defendant denied that any new contract had been concluded and counterclaimed contractual price adjustments under the existing agreement.

1. Contract formation. The claim based on an alleged contract formed by conduct or implication failed. The objective question was whether the parties had reached final agreement and intended to be legally bound. The court could not aggregate terms agreed during negotiations and impose a contract by deciding which matters appeared important. Under Pagnan SpA v Feed Products Ltd. [1987] 2 Lloyd’s Rep. 601, the parties themselves determine whether they will be bound and by which terms.
2. The negotiations remained incomplete. CWS treated the agreement of liquidated damages, delivery dates and the incorporation of ICL’s standard conditions as unresolved matters. CWS’s representatives consciously declined to sign until they were satisfied with the terms. No new agreement was therefore concluded.
3. The CRS Agreement was not discharged. However, its continuation did not make it applicable to the materially different GlobalSTORE project. Variation required a further legally binding agreement, and no such variation was made.
4. The alleged repudiatory breach was not established. Even assuming a contract existed, CWS’s decision to withdraw followed ICL’s refusal to agree liquidated damages, rather than acceptance of a repudiatory breach concerning a contractual delivery date. The relationship was terminated by consent or by CWS’s breach in seeking an unwanted variation.
5. The misrepresentation and restitutionary claims could not be pursued on the pleaded case. The alleged Misrepresentation Act claim depended on entry into the contract alleged, and no amendment was sought to introduce a properly pleaded negligent-misstatement or restitutionary claim.
6. The counterclaim succeeded. ICL was entitled to £1,012,422 under the price-adjustment provisions of the CRS Agreement, together with interest to be determined after submissions. The action was dismissed in its entirety.

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