RTS FLEXIBLE SYSTEMS LTD V MOLKEREI ALOIS MÜLLER GMBH & CO KG

[2009] EWCA Civ 26, Court of Appeal, Civil Division, Lord Justice Waller, Lord Justice Moses and Lady Justice Hallett, 12 February 2009

Contract – Work carried out under letter of intent – Whether contract had come into being

This was the appeal of a decision of Mr Justice Christopher Clarke ([2008] EWHC 1087 (TCC)). The background was that while contract negotiations proceeded, RTS carried out certain work for Müller under a letter of intent. The judge had found that in the circumstances, a contract had been concluded, but without incorporation of the MF/1 terms. He considered that Müller's wish to proceed was subject to the full contractual terms and relevant technical specifications having been finalised, agreed and signed within that timescale and was dependent on that taking place. If that did not occur, its wish to proceed would itself terminate together with the contract based upon that wish. The absence of agreed full contractual terms would be of limited significance over a four week period; but more significant, if it could continue until the end of the project. On appeal, it was argued that not only had no contract come into being on MF/1 terms, but not contract had come into being at all. The Court of Appeal reversed the judge’s decision on this ground. The contract term at issue was to be interpreted as meaning that no contract at all came into being, and not as meaning that no contract would come into being on MF/1 terms.