Skanska Rasleigh Weatherfoil v Somerfield Stores Ltd

An interim contract incorporating terms from a draft agreement incorporates only those terms necessary to define the services, where the wider draft terms remain subject to negotiation. An existing contract may continue after its stated expiry where the parties continue performing in a manner referable to that contract and no different contractual basis is agreed. Silence during negotiations does not make draft terms binding. A purported timing-out provision or settlement requires objective agreement; unilateral enforcement, discussions, or selective payments are insufficient.

The claimant provided maintenance services for the defendant’s stores under a letter of intent dated 17 August 2000, accepted on 21 August 2000. The parties contemplated a formal Facilities Management Agreement, but continued operating while negotiations remained incomplete.

The court determined seven preliminary issues concerning the incorporation of the draft agreement, continuation of the interim contract, alleged timing-out provisions, and an alleged settlement concerning unpaid work orders.

1. Incorporation of draft terms. The August 2000 Contract incorporated only those provisions of the June 2000 Facilities Management Agreement necessary to define the services. This included the services provisions, relevant definitions and the applicable specification, subject to consistency with the limited interim obligation. It did not incorporate the wider terms which remained under negotiation.
2. Continuation of the contract. The August 2000 Contract continued after 21 January 2001. The parties had an existing binding agreement before that date and continued providing and paying for the services on the same basis. Objectively, that conduct was referable to continuation of the existing contract. It was unnecessary to characterise the position as reactivation or resurrection. The parties would remain bound on that basis unless and until they agreed another contractual arrangement. A party’s later legal advice or mistaken assertion of a different contractual position did not alter that objective conclusion. The approach to implication from conduct in Baird Textiles Holdings Ltd v Marks & Spencer plc [2002] All ER (Comm) 737 supported this analysis.
3. Construction. The letter and incorporated documents had to be construed objectively against the factual background, applying the approach summarised in Mannai Investments v Eagle Star [1997] AC 749, Investors Compensation Scheme v West Bromwich Building Society (No. 1) [1998] 1 WLR 896, BCCI v Ali [2002] 1 AC 251 and Sirius International Insurance Co v FAI Insurance Co [2004] 1 WLR 3251.
4. Timing-out. No binding agreement was reached in September 2001 or at the meeting on 23 October 2002. The 2001 draft remained subject to contract. In October 2002 the parties agreed only that a 100-day period would be included in an amended draft for approval; they did not agree that it would bind them before signature.
5. Settlement. No full and final settlement was made at the December 2002 meetings. Somerfield agreed to pay items marked for acceptance, but there was no binding compromise concerning rejected, unmarked or other outstanding work. The parties’ dispute therefore remained governed by the contractual terms ultimately established, rather than by an alleged settlement.

Issues 3, 4 and 6 did not arise. The preliminary issues were answered accordingly.

The proceedings were at first instance. The court recorded that preliminary issues had been ordered in August 2005 and determined the seven agreed issues after trial.