Letters of intent and limitations of liability

In Arcadis Consulting (UK) Ltd (formerly called Hyder Consulting (UK) Ltd) v AMEC (BSC) Ltd (formerly called CV Buchan Ltd) [2016] EWHC 2509 (TCC) Coulson J held that the parties had entered into a simple contact based on a letter of intent sent by the defendant to the claimant pursuant to which the claimant would carry out design work and would be paid for that work by the defendant. More importantly, Coulson J held that the parties had not agreed any cap on the liability of the claimant. This was so notwithstanding the fact that every set of proposed terms and conditions discussed by the parties contained some form of cap. The failure of the parties to reach agreement on any of these caps had the consequence that no cap had been agreed and no limit placed on the liability of the claimant. The case provides a stark reminder of the need to ensure that agreement is reached on any attempt to place a cap on a contracting party’s liability because a failure to reach agreement may result in a court concluding, as here, that there is a contract between the parties but that the contract does not contain any cap on the liability of the parties.