Clearly, the contract should come first.
The Defective Car Park Story
In a judgment last month, the TCC decided the contractual rights and limits between a designer and the contractor. The judge said it was “a relatively straightforward contract/no contract case” but “with something of a sting in its tail.”
A £40m dispute is raging between the designer and specialist concrete subcontractor of a car park. The parties started the project before agreeing terms (sound familiar?). They wrote a series of letters about the T&C and never got round to signing a proper contract (ring any bells?). The court had to decide if there was a contract and if so, on what terms (here we go again).
The judge said:
“Whilst the court should always strive to find a concluded contract in circumstances where work has been performed… the court is not entitled to rewrite history so as to incorporate into that contract express terms which were not the subject of a clear and binding agreement.” 
What NOT to Do
Although the parties started with good intentions, a protocol (or framework agreement), proposed terms and conditions for each project and related documents… their good intentions were emasculated by the pressures to get the project started.
Lesson 1: a good contract strategy takes into account time pressures
A letter of intent asked the designer to carry out design and drawing work ‘pending formalisation of the relevant agreements’. Once those agreements were executed – including any agreed limit on the designer’s liability – the parties intended the agreements would supersede the letter and govern all designs.
Lesson 2: the letter of intent will rumble on and become permanent if you don’t get on with agreeing terms for the full contract
The designer was insistent that its liability for costs arising from defective design should be limited (partly related to its insurance levels).
Lesson 3: if you want the protection of the full contract, you need to sign the full contract
During the negotiations, documents were exchanged regularly for comment and review. Often the correct versions of the documents were not kept on file so the court could not decide what had/not been agreed. The court said “If the parties have no records, is the court in a position to say, even on the balance of probabilities, what precise documents made up the attachments?”
Lesson 4: proving what has been agreed at specific dates is critical (particularly if you never sign the full contract) so keep clear copies
No Happily Ever After
The court agreed that with Lord Clarke in RTS v Molkerei that once a transaction has been performed on both sides it “will often make it unrealistic to argue that there was no intention to enter into legal relations and difficult to submit that the contract is void for vagueness or uncertainty.”
The court decided there was a contract but without any limit on the designer’s liability:
This case starkly demonstrates the commercial truism that it is usually better for a party to reach a full agreement (which in this case would almost certainly have included some sort of cap on their liability) through a process of negotiation and give-and-take, rather than to delay and then fail to reach any detailed agreement at all
Lesson 5: agree first, start work later
Case: Arcadis Consulting (UK) Ltd v AMEC (BSC) Ltd  EWHC 2509 (TCC)