"If there are two sets of negotiations, one of which does not result in a

contract, that does not necessarily prevent the other from resulting in a

contract."

Not having read the case were there really two sets of negotiations? From your description it looks more like one set (the same machine, same price etc). If that's the case why isn't "no contract, unjust enrichment claim" the better answer?  

Jason Neyers

Associate Professor of Law

Faculty of Law

University of Western Ontario

N6A 3K7

(519) 661-2111 x. 88435

Robert Stevens wrote:

> An interesting decision of the Court of Appeal which I have only just come

> across RTS Flexible Systems v Muller

>

> http://www.bailii.org/ew/cases/EWCA/Civ/2009/26.html

>

> Overturning a decision of Christorpher Clarke J

>

> http://www.nadr.co.uk/articles/published/CommercialReports/RTS%20v%20Muller%202008.pdf

>

> Simplified, the facts are that RTS are the suppliers of automated

> machinery for packaging food, and Muller negotiate with them for the

> supply of some yoghurt packaging machines.

>

> Initially the parties contract on the basis of a 'letter of intent', but

> this, it is now accepted, expires and is no longer relevant.

>

> The agreement to replace the letter of intent contained a clause (48)

> which stated that

>

> "This Contract may be executed in any number of counterparts provided that

> it shall not become effective until each party has executed a counterpart

> and exchanged it with the other."

>

> This never occurred.

>

> Meanwhile, machinery was delivered and paid for.

>

> A dispute arose. Before Clarke J the only issue seems to have been what

> the contract's terms were, but before the Court of Appeal the manufacturer

> changed tack and argued that because of clause 48 there was no contract at

> all. They did so because this would mean that their potential liability

> would then be limited (see para [48] of Waller LJ's judgment) to

> reimbursing anything they had been overpaid over and above a quantum

> meruit.

>

> Clarke J, following Steyn LJ in Trentham v Archital Luxfer [1993] 1 Lloyds

> LR 25, held that there was a contract which arose from the parties'

> performance. The Court of Appeal concluded that as the negotiations

> disclosed that there was no contract unless the conditions in clause 48

> were satisfied, that there was as a result no contract, following a

> similar approach of Goff J in British Steel Corporation v Cleveland

> Bridge[1984] 1 All ER 504.

>

> My own view, is that the view of Clarke J and Steyn LJ is to be preferred.

> If there are two sets of negotiations, one of which does not result in a

> contract, that does not necessarily prevent the other from resulting in a

> contract. Similarly, the fact that the one set of negotiations resulted in

> no contract, doesn't mean that no contract arose when the machinery was

> manufactured, delivered, accepted and paid for. Can it really be the case

> that the manufacturer (RTS) had given no undertaking that the machinery

> supplied would work, so that if it didn't they would not be liable for the

> (vast?) consequential loss that Muller might consequently suffer? Did

> Muller, after installing the machines, really intend that their

> contractual obligation to pay for what they had received was still

> conditional on the exchange of a counterpart?

>

> The Supreme Court have given leave to appeal  (the Court of Appeal had

> refused).

>

> RS

>

>

>