Court Of Appeal Finds Interim Contract Incorporated Terms And Conditions Including Limitation Of Liability

In a recent judgment, the Court of Appeal has overturned a High Court decision which found that the defendant had undertaken preliminary work for a building project under an interim contract which did not incorporate any terms and conditions. The Court of Appeal found that terms and conditions had in fact been incorporated by reference, so that the defendant's liability was limited: Arcadis Consulting (UK) Ltd v AMEC (BCS) Ltd [2018] EWCA Civ 2222.

The decision suggests that (whilst there are clearly risks in commencing work without a clear written agreement as to the terms that will apply on an interim basis) the court may be reluctant to conclude that a party has assumed an unlimited liability for works carried out under an interim contract pending negotiation of a final agreement, when it never would have assumed such liability under that final agreement. Each case will, however, turn on its facts and parties would be well advised to ensure there is no room for argument as to the terms that apply at any stage.

Background

The claimant (AMEC (BCS) Ltd) was a contractor specialising in the design, manufacture and installation of pre-cast concrete for the civil engineering and construction industries. It engaged the defendant (Arcadis Consulting (UK) Ltd) to carry out certain works in connection with two large projects, the Wellcome Building and the Castlepoint Car Park, in anticipation of a wider agreement between the parties which did not ultimately materialise.

It is alleged that the Castlepoint Car Park is defective and that the claimant has suffered significant losses as a result of this. The defendant denies liability for the defects. The defendant brought proceedings in 2015 seeking a declaration as to the effect of a contractual liability cap it relies upon.

There was a dispute as to the terms on which the defendant carried out the works, in the absence of a formal written agreement which was still being negotiated at the relevant time, and in particular whether those terms incorporated a cap on the defendant's liability. The relevant correspondence included:

8 November 2001: Claimant's email to defendant attaching updated terms and conditions and protocol documents. The email stated: "We intend to use the documents for the Wellcome Building works subject to your agreement and we will be providing more details shortly." The terms and conditions contained a limit of liability defined as the lesser of the reasonable direct costs of...