Where important terms are still under negotiation there is no contract – Whittle Movers v Hollywood Express, Court of Appeal…

The Court of Appeal has ruled that where important terms were still under negotiation, no contract had been concluded. Whittle Movers had been successful in its tender for the supply of distribution and warehousing services to Hollywood Express. The tender process had been ‘subject to contract’ but before a formal long-term contract had been finalised Whittle Movers began performing the services and invoicing on the basis of prices negotiated for a five and a half year contract. After 15 months, Hollywood Express decided to terminate what it called an ‘interim agreement’ based on its previous subcontract with a third party which provided for termination by either side on six months’ notice. Whittle Movers argued that the parties had entered into the long-term contract or in the alternative it suggested that no contract had been concluded. The High Court found in favour of Hollywood Express, but the Court of Appeal disagreed.

The Court of Appeal found that there had not been a complete agreement on important terms. In addition, neither party had indicated that their negotiations were no longer ‘subject to contract’ or that they no longer required a formal written document to be signed by the parties before the agreement became binding between them. The Court of Appeal took the view that it was highly unlikely that, by conduct, the parties would conclude in the interim a binding contract containing terms that were still the subject of negotiation. Instead, the Court of Appeal ruled that the parties would most likely have entered into a contract under which if one party supplied, the other agreed to pay a reasonable remuneration. Where important terms were still under negotiation, the Court of Appeal said that no contract had been concluded and a court should not strain the situation to imply one unless it was necessary to do so. In this case, the Court of Appeal found it was not necessary as the restitutionary remedy of ‘unjust enrichment’ could resolve the issue between the parties. If Whittle Movers had provided the services at a lower price (on the basis of a five and a half year contract) which was less than reasonable in the circumstances then arguably Hollywood Express had been unjustly enriched. The Court of Appeal concluded by ordering an enquiry into whether Hollywood Express had been unjustly enriched.

Samantha Lloyd, assistant editor of www.Upload-IT.com and a solicitor at Matthew Arnold & Baldwin, comments: ‘This case is a clear example of the dangers of providing goods or services before a contract for the supply has been concluded. It leads to uncertainty and, in a small number of unfortunate cases, protracted litigation when a party finally wants to rely on a terms which they did not take the time to fully negotiate.’