CONTRACT FORMATION, AGREEMENT ON ESSENTIAL TERMS AND ESTOPPEL

Haden Young Ltd v Laing O’Rourke Midlands Ltd [2008] EWHC 1016 (TCC), 8 May 2008

In Haden Young Ltd v Laing O’Rourke Midlands Ltd [2008] EWHC 1016 (TCC), 8 May 2008 Mr Justice Ramsey held that the parties had not entered into a binding sub-contract, notwithstanding the fact that work had been done and paid for. There were a number of reasons for the lack of a binding sub-contract. First, the parties had failed to reach agreement on terms which the parties regarded as essential to the formation of a contract. Second, they had proceeded on the basis that there would be no contract unless there was a formal signed and executed contract and, in the absence of such a document, there was no contract between the parties. Thirdly, it was held that estoppel could not be invoked in order to give legal effect to the agreement. English law does not permit the creation or recognition by estoppel of an enforceable right so as to create a cause of action. Finally, it was held that, in the absence of a binding contract, the claimants were entitled to recover payment from the defendants on a quantum meruit basis.