THE MEANING OF ‘UNDER THE CONTRACT’ IN A LETTER OF INTENT

Skanska Rashleigh Weatherfoil Ltd v Somerfield Stores Ltd [2006] EWCA Civ 1732 (unreported, 22 November 2006)

In Skanska Rashleigh Weatherfoil Ltd v Somerfield Stores Ltd [2006] EWCA Civ 1732 (unreported, 22 November 2006), the Court of Appeal held that the words ‘under the terms of the Contract’ in a letter of intent had the effect of incorporating into the contract represented by the letter of intent the terms of the draft contract which had been under negotiation between the parties prior to the sending of the letter of intent (unless those terms were inconsistent with the terms of the letter of intent). The Court of Appeal rejected the submission that the reference to ‘the Contract’ was only for the purpose of identifying the services to be performed. In reaching this conclusion the court placed primary emphasis on the natural meaning of the words ‘under the Contract’ and stated that the adoption of a commercially minded construction of a clause does not give to the court a licence to re-write the contract simply because the terms appear a little unexpected, unreasonable or unwise.