Cases - Harvey Shopfitters Ltd v ADI Ltd

Record details

Harvey Shopfitters Ltd v ADI Ltd
EWCA Civ 1757
Tendering and procurement

Harvey was asked to provide a tender to carry out works to ADI's property, which consisted of 6 flats, pursuant to the JCT Intermediate Form of Building Contract (IFC 98) conditions. In June 1998, Harvey offered to carry out the works for approximately £339,000. Thereafter, the architects wrote a 'letter of intent'. By the date of the letter, there was nothing left for the parties to discuss or reach agreement on. Nor, it was found, did they necessarily contemplate that a formal contract would be issued at a later date. The contract works were carried out and payments made as though the IFC 98 conditions applied. A dispute about the final account was referred to adjudication. Harvey then commenced proceedings, alleging for the first time that their claim was for a quantum meruit. ADI said the work was done pursuant to a lump sum contract. The crucial phrase in the letter was:

'If, for any unforeseen reason, the contract should fail to proceed and be formalised, then any reasonable expenditure incurred by you in connection with the above will be reimbursed on a quantum meruit basis.'

Harvey argued that this meant that the parties intended the contract to be 'formalised' by formal contract documents being signed, and in its absence Harvey was entitled to a quantum meruit.

The Court of Appeal rejected this argument. The court held that it was entitled to look behind the letter and to have regard to the surrounding circumstances. It had regard to the fact that the letter was the culmination of a procedure which had resulted in the agreement of everything necessary to be agreed. The Court of Appeal found that the words meant that the only circumstance in which Harvey would be entitled to a quantum meruit was if the contract did not proceed and was not finalised. The contract did proceed and so Harvey was not entitled to a quantum meruit.

The Court of Appeal maintained that there was nothing to prevent parties from making related agreements on different terms and that in this case a putative subjective intention to achieve symmetry did not support the existence of an objective mutual intention to enter into a Design Agreement on FIDIC (International Federation of Consulting Engineers) terms. Accordingly, the defendants ADI could not rely upon the cap on liability.