CRS GT Ltd v McLaren Automotive Ltd & Ors

Contractual interpretation is a unitary exercise directed to the objective meaning of the agreement read as a whole. In a detailed commercial contract, clear wording carries substantial weight. A clause assigning a party “responsibility” for services ordinarily creates an obligation; it does not, without appropriate language, confer an exclusive right to provide those services.

A heads of agreement may be binding despite unresolved detail, but only where the parties objectively intended to be bound. Where the document is effectively subject to a later formal contract, substantial performance does not itself establish that the condition has been waived. The court must examine the parties’ words and conduct, the incompleteness of the agreement and whether crucial terms remain unresolved.

CRS designed, developed and supplied racing cars and related parts and services for companies in the McLaren group. Its claims concerned two projects.

For the GT3 project, CRS sought a declaration that a clause in the expired written agreement gave it an exclusive post-contractual right to provide aftersales services and supply non-standard parts. For the GT4 project, CRS contended that a signed heads of agreement, or the parties’ subsequent conduct, created a binding contract giving it exclusive supply and aftersales rights.

The court also considered CRS’s entitlement to remuneration for work performed where no overall GT4 contract was concluded.

1. GT3 agreement. Applying the unitary approach to contractual interpretation, the court gave substantial weight to the language and structure of the detailed written agreement: Wood v Capita Insurance Services Ltd [2017] AC 1177. The provision making CRS responsible for all aftersales service imposed an obligation, not an exclusive right. The agreement dealt expressly with exclusivity elsewhere, limited those rights to the contract period and permitted McLaren to prepare for a replacement supplier. CRS therefore had no exclusive post-expiry right to provide GT3 aftersales services.
2. GT4 heads of agreement. The question whether a contract existed depended objectively on communicated words and conduct, intended legal relations and agreement on terms regarded by the parties or the law as essential: RTS Flexible Systems Ltd v Molkerei Alois Muller GmbH & Co KG (UK Production) [2010] 1 WLR 753 SC. The distinction was between an incomplete agreement in principle and a complete contract leaving detail to be settled: Pagnan v Feed Products [1987] 2 Lloyd’s Rep 601.
3. The GT4 heads of agreement was not binding. It was expressed in casual and non-legal language, left commercially significant matters unresolved, including pricing, tooling, liability, vehicle specification, bill of materials and intellectual property ownership, and contemplated a later formal contract. Objectively, the parties intended to proceed with the project while negotiating that contract. Subsequent performance did not alter that conclusion.
4. A contract made subject to contract may later become binding if the parties waive that condition, but performance alone does not establish waiver. The parties’ conduct remained consistent with the need for a formal contract. Their binding arrangements were limited to particular purchase orders and remuneration on a quantum meruit basis. The analysis was on the same side of the line as British Steel Corpn v Cleveland Bridge and Engineering Co Ltd.
5. Even assuming that the heads of agreement had been binding, references to CRS providing customer support would have imposed an obligation rather than granted exclusive rights. The claim for such GT4 exclusivity therefore failed. CRS was entitled to payment under the agreed financial model as each further GT4 car was sold, subject to the minimum return, and the court granted a declaration of that entitlement.

First-instance decision in the High Court (Commercial Court). No prior appellate decision is stated in the judgment.