The Supreme Court (speaking through Lord Clarke) have overturned the

decision of the Court of Appeal in RTS Flexible Systems v Muller that I

was moaning about a couple of months ago.

http://www.supremecourt.gov.uk/docs/UKSC_2009_0048_JudgmentV2.pdf

Quite right too.

RS

>

> 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

>

>

> --

> Robert Stevens

> Professor of Commercial Law

> University College London

>

>

--

Robert Stevens

Professor of Commercial Law

University College London