The process of getting a deal done should be simple – but somehow we often far more complex than it needs to be… through time pressures, through inconsistency, or through burying our heads!
In a recent English court case (CLS Civil v WJG Evans), the buyer and the supplier tied themselves in all sorts of knots from the very start. What they needed was a simple process but it wasn’t what they got!
The chronology was:
- the buyer’s invitation to tender included three versions of a proposed contract
- at the post-tender meeting the buyer confirmed that a specific standard form JCT contract would apply – with no contractor design and no delay damages (ie pre-agreed damages for late completion)
- the contract was not signed before works started so the buyer sent a letter of intent to the supplier
- after the works had started, the buyer sent a draft contract which included elements the supplier had not expected including part-responsibility for designing the works, delay damages and additional legal terms (the dreaded schedule of amendments)
- the supplier continued to work but said it would not sign a contract that is not based on the one included in the tender information
- the buyer issued another 4 letters of intent while trying to resolve the contract issues (possibly not hard enough?)
- finally, after over £1m work had been done, the buyer decided the contract would never be resolved and asked the supplier to demobilise ie ending its involvement in the project.
In reviewing the position of the parties, the court said that there was never any meeting of minds about the proposed ‘proper’ contract so it did not govern the parties’ relationship.
Frankly, this whole shenanigans reminds me of the judge’s comments in another letter of intent case (Arcadis v Hyder):
I am bound to conclude that this was the inevitable consequence of [the supplier’s] dilatory and often uncooperative approach to the proposed… agreement and the negotiation of the terms and conditions. This case starkly demonstrates the commercial truism that it is usually better for a party to reach a full agreement…through a process of negotiation and give-and-take, rather than to delay and then fail to reach any detailed agreement at all.
A poor process exacerbated by poor content led to a poor result for all.
What should you do?
To avoid doing deals badly, you need a simple process, clear content and to build great relationships from the start.
Don’t start work until you are sure that you have agreed everything that is important to the deal.
Sources: CLS Civil Engineering Ltd v WJG Evans and Sons [2024] EWHC 194 and Arcadis Consulting (UK) Ltd v AMEC (BSC) Ltd [2018] EWCA 2222
Related posts: last minute legals, don’t delay, contract before work and 4 steps for better proposals
