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

A letter of intent may create an if contract where it requests specified performance and promises a specified return. Acceptance may be shown by conduct. Where there is no rejection or counter-offer, acceptance extends to all the terms of the offer. An interim contract may govern work while the parties negotiate a final agreement. Later drafts do not supersede the interim terms without unequivocal acceptance. Terms may be incorporated by reference where the incorporating language identifies them objectively. The incorporated wording must be read into the host contract, with only inconsistent or insensible provisions rejected. A clear liability cap in incorporated terms governs the interim contract.

Arcadis appealed against Coulson J’s decision that its work for AMEC arose under a contract formed by AMEC’s first letter of 6 March 2002, but that no terms and conditions were incorporated. The appeal concerned whether the November Terms, previously exchanged during negotiations concerning the Wellcome Building, were incorporated into the contract for the Castlepoint Car Park.

The parties had continued work while negotiating a final Protocol Agreement, which was never executed. The central issues were whether the first letter created an offer capable of acceptance, whether an interim contract was distinct from the anticipated final agreement, and whether the November Terms, including condition 2A(a), governed the interim contract.

The appeal was allowed. Any liability of Arcadis to AMEC was held to be subject to condition 2A(a) of the November Terms.

1. A request to commence work pending a formal contract may create an if contract. It is a standing offer under which specified performance is requested in return for a specified performance. Applying the analysis in British Steel Corp v Cleveland Bridge & Engineering Co Ltd [1984] 1 All ER 504, the first 6 March Letter offered work for a fixed fee of £56,000, subject to revision. Arcadis accepted the offer by its 8 March letter, or alternatively its 22 March letter, and in any event by undertaking the work: [89]-[90].
2. The terms of the contract had to be determined objectively from the parties’ communications and conduct. The law required final and unqualified assent, but it did not require use of the word accept or express mention of every term. Since there was no rejection or counter-offer, acceptance by conduct extended to all terms of the first 6 March Letter, including its reference to the applicable terms and conditions. The court applied RTS Limited v Molkerei Alois Müller GmbH [2010] 1 WLR 753 and followed the principle stated in Day Morris Associates v Voyce [2003] EWCA Civ. 189: [91]-[94].
3. The judge had wrongly conflated the interim contract with the final Protocol Agreement. The November Terms could govern work in the interim, while a subsequently agreed final agreement would supersede them. The parties did not need first to agree the final overarching terms before creating a binding legal relationship: [95]-[99].
4. The natural meaning of currently working under referred to terms previously exchanged and agreed, not terms still under negotiation. The November Terms had been agreed for the Wellcome project and applied to the Castlepoint work. The January Terms and the terms sent with the second 6 March Letter were later proposals and had not been unequivocally accepted: [100]-[116].
5. Applying the incorporation approach in Tradigrain SA v King Diamond Shipping SA [2000] C.L.C. 1503, the November Terms were incorporated by reference. Condition 2A(a) therefore governed Arcadis’s design liability. Underhill LJ and Holroyde LJ agreed: [117]-[126].

1. Court of Appeal (Civil Division): Allowed the appeal and held that Arcadis’s liability was subject to condition 2A(a) of the November Terms, [2018] EWCA Civ 2222.
2. High Court of Justice, Queen’s Bench Division, Technology and Construction Court: Coulson J found that a contract arose from the first 6 March Letter but held that no terms and conditions, including the proposed liability cap, were incorporated, [2016] EWHC 2509 (TCC).