British Steel Corp v Cleveland Bridge and Engineering Co Ltd [1984] 1 All ER 504

Cleveland Bridge asked British Steel to manufacture steel nodes for a construction project. A letter of intent requested work before the parties had agreed their complete contractual terms. Manufacture proceeded while issues concerning the proposed contract remained unresolved. British Steel supplied the nodes and sought payment. Cleveland Bridge resisted payment and advanced a claim based on delay in delivery. The litigation therefore required the court to decide whether a contract had arisen through the letter and subsequent conduct, and, if not, whether the manufacturer could obtain reasonable remuneration for the requested work.

Did the letter of intent and performance establish a contract, or was payment recoverable in restitution while the alleged contractual delay claim failed?

Robert Goff J held that no contract covering the disputed obligations had been concluded. Important terms remained unresolved while the parties proceeded with work under the letter of intent. The requested manufacture and delivery did not, in these circumstances, establish agreement to all the contractual obligations asserted.

British Steel could nevertheless recover reasonable remuneration for the work requested and supplied. That claim arose in restitution, not by enforcing the incomplete bargain as a contract. Cleveland Bridge could not rely on the unagreed delivery obligations to recover contractual damages for delay. The judge emphasised that a letter of intent has no automatic legal effect of one kind: whether it produces a contract depends on the particular communications and conduct.

Work requested and performed while contractual terms remain unresolved may support reasonable remuneration in restitution even though no contract has been concluded. A letter of intent is not invariably binding or non-binding. Contractual damages require proof of an agreed obligation, not simply proof that work occurred.

British Steel is useful for separating contract formation from payment for requested benefits. It should not be read as allowing every recipient of work to avoid contractual responsibility by pointing to an unsigned document. The whole course of communications and conduct matters, as the later RTS Flexible Systems decision illustrates. Once no contract is established, the court must identify the restitutionary basis for payment rather than inventing agreed terms. The unavailable delay counterclaim shows the practical consequence of that distinction.