Hescorp was negotiating a contract with Morrison for Hescorp to do some building work
Topic: Contract
Who: Hescorp Italia SpA v Morrison Construction Ltd
When: March 2000
Where: Queen’s Bench Division of the High Court, London
What happened:
Hescorp was negotiating a contract with Morrison for Hescorp to do some building work. The case focused on whether they ever had a contract, a question close to Hescorp’s heart since by the time the dispute arose they had finished the work. A scenario all too familiar in the marketing services industry! Morrison’s Invitation to Tender stated that if the Tender was accepted Hescorp would have to “enter into a formal sub contract agreement.” The main areas for discussion and agreement were a timetable for the works and the amount of pre-determined damages Hescorp would have to pay Morrison if they failed to complete or delayed. Inconclusive correspondence was followed by a meeting whose minutes said a timetable was to be agreed and on damages referred back to earlier papers. Hescorp was then asked to sign and return the contract and start work. Hescorp started work but didn’t sign the contract, and a later meeting to conclude all outstanding matters left the completion date unagreed. Even when Hescorp signed a contract, after the works were completed, it unilaterally amended the completion date and the damages figures.
The judge approached the case on the basis that there could be no contract if there was no agreement on matters which, on the evidence, the parties agreed had to be determined before a contract was formed. In the event he held that the completion date was such a matter and since this was never agreed no contract was concluded.
Why this matters:
It is to be hoped for their sake that Hescorp ran an alternative “quantum meruit” claim, regardless of any contract, for damages equivalent to the value of the work done. The case highlights, however, the dangers to service providers of getting on with the work but failing to agree in writing the fundamental terms of the deal. Wherever possible, creative enthusiasm should be kept in check until there is a signed contract covering the essential areas. If the commitment and pressure is there to agree a form of words, it is surprising how quickly it can be done!
