Arcadis Consulting (UK) Ltd v AMEC (BSC) Ltd

A court should generally recognise a simple contract where parties have instructed and performed work, even though they contemplated a later formal agreement. The contract is identified objectively from the parties’ communications and conduct. However, proposed terms are incorporated only where there is clear and final assent to the relevant wording. Incomplete, repeatedly amended or superseded contractual documents cannot be incorporated merely because they were mentioned in an instruction. A liability cap, particularly one substantially limiting remedies for defective design, requires clear agreement. The court cannot rewrite the parties’ negotiations to create a cap that was never unequivocally accepted.

AMEC (BSC) Ltd engaged Arcadis Consulting (UK) Ltd to provide design services for the Castlepoint Car Park and related projects. The parties expected to enter an overarching Protocol Agreement containing detailed terms and project-specific schedules, but no such agreement was signed.

Arcadis nevertheless carried out the work pursuant to letters of instruction and later sought to rely on a £610,515 liability cap in Schedule 1(M). AMEC contended that no contract existed; alternatively, it argued that the proposed terms and schedules, including the cap, had not been incorporated. The central questions were whether a simple contract arose and, if so, whether the proposed liability limitation formed part of it.

1. Contract formation. Applying the objective approach in RTS Limited v Molkerei Alois Müller GmbH [2010] 1 WLR 753, and the authorities concerning performed letters of intent, the court found a binding simple contract. AMEC’s first letter of 6 March 2002 instructed Arcadis to carry out design work, subject initially to a financial limit. Arcadis accepted the instruction principally by performing the work. The absence of a signed Protocol Agreement did not prevent contractual relations.
2. The earlier kick-off meeting and commencement of work did not create the contract because Arcadis had requested a formal instruction and expenditure limit before proceeding. The contract therefore arose from the first letter of 6 March and Arcadis’s subsequent conduct.
3. Incorporation. No version of the proposed terms and conditions was incorporated. The November 2001 version had been superseded and had never been accepted. The January version could not be identified with sufficient precision. The March version was a further proposal which Arcadis never accepted clearly or unequivocally. The references to terms under which the parties were currently working were too general to identify an agreed set of conditions.
4. Schedules 1–4 were also excluded. They were incomplete, dependent on the unagreed terms and conditions, and were not referred to or accepted in Arcadis’s later correspondence. Their contents were in places unrelated to Arcadis’s agreed scope of work.
5. Liability cap. Schedule 1(M) was parasitic upon the unagreed limitation clause. It was not an independently agreed term. Applying the principle that important contractual remedies are not lightly cut down without clear words, the court rejected Arcadis’s claim to a £610,515 cap.
6. On an alternative analysis, if the March terms and conditions had been incorporated, the figure would have applied only to the narrower liability identified in clause 2A(c), not to liability for repair and reinstatement under clause 2A(b). This alternative construction was unnecessary to the decision.
7. The court refused Arcadis’s requested declaration and granted AMEC a declaration that there was no limit on Arcadis’s liability for defective design.