Whittle Movers Ltd v Hollywood Express Ltd

Performance begun while negotiations remain subject to contract does not itself establish a binding contract. A contract should be implied from conduct only where implication is necessary. Conduct equally consistent with the absence of a contract is insufficient.

Where important terms remain under negotiation, the proper analysis may be that no contract exists. A party which requests and accepts services must nevertheless pay their reasonable value. It is unjustly enriched to the extent that its payments fall below that value. Courts should not strain to find a contract where restitution provides the appropriate remedy.

Whittle Movers Ltd supplied distribution services to Hollywood Express Ltd while the parties negotiated a long-term agreement. Their tender documents and letter of intent were expressed to be subject to contract. No formal long-term agreement was executed, although services began and prices derived from the proposed long-term arrangement were paid.

His Honour Judge Raynor QC held that no long-term contract existed but found an interim contract terminable on six months’ notice. Whittle appealed, principally challenging the finding of an interim contract and seeking a restitutionary remedy.

The central issues were whether any contract governed the services supplied after 23 January 2006, whether Hollywood might have been unjustly enriched, and whether Whittle remained entitled to pursue restitution despite having advanced a contractual case at trial.

1. Appeal allowed unanimously. The findings that no long-term contract arose in January or September 2006 were unassailable. Important terms remained unsettled, and nothing showed an express or implied waiver of the requirement that a formal written contract be executed before the parties became bound.

2. The judge erred by determining that some interim contract must govern the parties’ dealings. As explained in British Steel Corporation v Cleveland Bridge and Engineering Co Ltd [1984] 1 All ER 504, conduct during negotiations for reciprocal future obligations is unlikely to create an executory contract containing terms which remain under negotiation. Even an arrangement requiring reasonable remuneration upon performance should not be inferred where important performance terms remain unsettled.

3. A contract cannot be implied merely because services were performed and payments made. Implication must be necessary. The conduct must be referable to the alleged contract or inconsistent with the absence of a contract. Here the parties might have acted exactly as they did while anticipating a formal agreement. The negotiations remained subject to contract, and neither the obligations concerning performance nor prices appropriate to a short-term arrangement had been agreed.

4. The proper conclusion was therefore that no contract governed the relevant services. This did not deprive Whittle of remuneration. Hollywood requested and accepted the services and was bound to pay a reasonable sum. If the payments already made represented reasonable value, there was no unjust enrichment. If they were below reasonable value, Hollywood was enriched to the extent of the shortfall. That claim was at least arguable.

5. Whittle had sufficiently preserved restitution as a final alternative in its correspondence, pleadings and trial skeleton. Counsel’s responses after the judge announced that he intended to find a contract did not constitute a binding abandonment of that case. The Court directed an inquiry into unjust enrichment and ordered Whittle to serve full particulars of its claim within 28 days.

1. Court of Appeal (Civil Division): The appeal was allowed unanimously. The finding of an interim contract was set aside, and an inquiry into unjust enrichment was directed.

2. Manchester District Registry Mercantile Court: His Honour Judge Raynor QC, sitting as a High Court judge, held that no long-term contract had been concluded but that the parties had entered an interim contract terminable on six months’ notice. Judgment was handed down on 22 December 2008; no citation is stated.