• In the case of British Steel Corp v Cleveland Bridge and Engineering Co Ltd [1984] 1 All ER 504, the courts ruled on the contract remedy of restitution and how it impacts unjust enrichment.
  • This contract case is about contract terms, letters of intent and incomplete agreements.
  • This case considered the principle of quantum meruit.

Facts of the Case

  • D intended to contract with C therefore provided them with a letter of intent. D listed the terms such as delivery of the nodes.
  • C claimed for its value after D did not pay the purchase price even though the nodes were constructed past the delivery date as requested by D.

Issues

  • What were the contracting terms?
  • Was the contractor entitled to the product value?

Held by High Court

  • D is liable – there was no contract formed by the letter of intent nor could the delivery date be enforced.

Robert Goff J

Heading

  • The letter of intent was not an executory contract. The terms that D provided were simply an offer accepted by C since C started and completed the work.
  • “There can be no hard and fast answer to the question whether a letter of intent will give rise to a binding agreement: everything must depend on the circumstances of the particular case. In most cases, where work is done pursuant to a request contained in a letter of intent, it will not matter whether a contract did or did not come into existence… But where, as here, one party is seeking to claim damages for breach of contract, the question whether any contract came into existence is of crucial importance.”

Performance

  • “As a matter of analysis the contract (if any) which may come into existence following a letter of intent may take one of two forms: either there may be an ordinary executory contract, under which each party assumes reciprocal obligations to the other; or there may be what is sometimes called an ‘if ‘ contract, ie a contract under which A requests B to carry out a certain performance and promises B that, if he does so, he will receive a certain performance in return, usually remuneration for his performance. The latter transaction is really no more than a standing offer which, if acted on before it lapses or is lawfully withdrawn, will result in a binding contract.”
  • Restitution applies. C was not contractually obliged to complete the work yet C finished it and did not breach the term of completing the work within a reasonable time period as requested by D – supported by obiter dicta in Courtney & Fairbairn Ltd v Tolaini Bros (Hotels) Ltd [1975] 1 All ER 716.