Twintec Ltd v GSE Building and Civil Engineering Ltd

A binding construction contract may arise through a document described as a letter of intent. Its legal effect depends on the parties’ objectively assessed intention and the terms agreed in the circumstances of the particular case. Contract formation is not prevented merely because detailed design, work sequencing or retention arrangements remain to be settled, provided the essential terms, including scope, price and the allocation of risk, have been agreed. An inaccurate later attempt to record the contract does not alter terms already agreed or have contractual effect where the contract was previously formed.

Twintec claimed that GSE had contracted with it to design and construct external concrete slab work at a B&Q site. GSE subsequently instructed another contractor and admitted that, if a binding contract existed, it had repudiated it. The trial was confined to liability.

Twintec relied principally on its quotation dated 31 July 2001, discussions between the parties on 2 August, and GSE’s letter dated 13 August 2001, described as a letter of intent. GSE denied contract formation, contending that agreement on matters including remeasurement, risk and retention remained outstanding. The central issue was whether the parties had concluded a binding contract by 13 August 2001.

1. Contract formed. Twintec’s quotation was an offer which was modified during the 2 August meeting. The parties agreed that GSE could choose between a remeasurement basis and a fixed-price lump-sum basis. GSE chose the latter, and its letter of 13 August formally confirmed that choice.
2. The contract covered the external slab work described in quotation Q0518B, at a fixed price of £637,897.46, with Twintec assuming the contractual risks. The scope and quality of work were sufficiently identified, and the essential terms of price, scope and programme had been agreed. Only the sequence of work remained, and the parties agreed that it could be settled later.
3. The description of the 13 August letter as a letter of intent was not decisive. There is no settled general rule governing such letters. The court must determine their effect on the facts. On the facts, the letter constituted acceptance and confirmed an existing commitment.
4. Agreement on retention was not necessary for contract formation. On the evidence, the contract was not subject to retention; in any event, retention was not a material term. Credit insurance was an internal matter for Twintec and was not a contractual condition.
5. The letter of 15 October 2001, which inaccurately referred to remeasurement, was written after the contract had been formed and was not relied on as a final record of its terms. It therefore had no contractual effect.
6. GSE conceded that it repudiated the contract if one existed. Twintec therefore succeeded on liability. The agreed declaration also established Twintec’s entitlement in principle to a quantum meruit or reasonable sum for work and costs incurred pursuant to the 13 August letter if no contract had been found.