The Rugby Group Ltd v Proforce Recruit Ltd

An agreement marked subject to contract may become binding where, after signature, the parties have performed the obligations contemplated by it. Contractual construction is objective. The court considers the text against the relevant factual matrix, excluding negotiations, subjective intentions and matters superseded by an entire agreement clause. A term conferring preferred supplier status does not, without clearer language, require the customer to use only that supplier or to maintain a preferred supplier system. It may instead give the supplier priority if such a system is introduced. A proposed implied term will not be inserted where the agreement remains substantially effective without it and the term is not obviously intended.

The Rugby Group Ltd appealed against the Senior Master’s refusal to strike out or summarily dismiss ProForce Recruit Ltd’s claim under CPR 3.4 and CPR Part 24. ProForce relied on a written agreement under which it supplied personnel and equipment to Rugby’s cement works for a minimum two-year period, during which it would hold preferred supplier status.

The parties had performed substantial parts of the agreement. ProForce claimed that Rugby breached it by using other labour suppliers for non-cleaning personnel. The issues were whether the agreement was enforceable despite the words subject to contract, whether negotiations and an entire agreement clause affected construction, and whether preferred supplier status imposed the wider obligation alleged by ProForce.

1. Enforceability. The words subject to contract ordinarily prevent an executory contract from arising until a further contract is executed. Here, however, the parties performed the agreement after signature: ProForce paid for machinery and supplied the specified personnel and equipment, while Rugby paid the stipulated charges. The parties were therefore to be taken to have entered into an implied binding contract on the agreement’s terms.
2. Construction. The relevant approach was the objective contextual approach described in [1998] 1 WLR 896, [1971] 1 WLR 1381, [1976] 1 WLR 989 and [2004] UKHL 54. The 2001 statements relied on by ProForce were negotiations and were excluded from the factual matrix. In any event, clause 9.2 superseded prior representations, negotiations and understandings, so they could not be relied on in construing the agreement. Post-contract conduct was also irrelevant to construction.
3. Preferred supplier status. The words meant that, if Rugby operated a system of contracting only with preferred suppliers at the site, ProForce was to be treated as one of them for all categories of personnel, not merely cleaners. They did not require Rugby to operate such a system, contract only with preferred suppliers, or offer ProForce every personnel requirement before approaching others.
4. The proposed implied terms were rejected. The agreement was substantially efficacious without them, and they were not obvious terms which the parties must have intended. Rugby’s use of other suppliers for non-cleaning requirements was therefore not a breach.
5. Rugby’s appeal was allowed. ProForce’s claim was struck out and judgment was entered for Rugby under CPR Part 24.

The judgment records an appeal from the Senior Master’s decision of 12 November 2004, which dismissed Rugby’s applications under CPR 3.4 and CPR Part 24. The High Court allowed the appeal, struck out ProForce’s claim and entered judgment for Rugby.