Failure to Agree Terms - what are the implications on the liability of your business?
In the case of Arcadis Consulting (UK) Limited v AMEC (BSC) Limited, the High Court has ruled that none of three versions of terms and conditions that had been discussed applied, and therefore the basis for an agreement was a letter of intent.
Crucially, this meant that there was no cap on liability, as that provision had been included in the terms and conditions and not in the letter of intent.
The General Principles
The facts of the case were specific to the particular situation, but the general principles need to be noted.
The Court gave a lesson in how to conduct contract negotiations, saying that the situation had arisen due to the uncooperative nature of one of the parties in the negotiation process. That party was never clear about what it accepted and what it rejected, or why. Ultimately, there was no agreement because the position kept shifting.
The judge added that the Court would always try to find that a concluded contract has occurred when performance has taken place, but it is not within the court's remit to re-write history to find that certain express terms applied when they had not been agreed.
Comment
As the judge noted here, it is better to reach agreement with some give and take, rather than not have a clearly agreed position. The consequence of contracting based on a letter of intent, instead of a full agreement, was that a significant clause - the limitation of liability clause - did not apply here. Therefore, a failure to agree meant that the service provider had unlimited liability.