Whenever a disagreement arises on a project the first step is for the parties to try and sort it out themselves. Sorting it out usually involves discussions between party representatives at meetings or via email. This is a sensible first step in any dispute and one that can save time and money as well as preserving relationships. However, a recent UK case has highlighted that care needs to be taken during these discussions as any agreements can be legally binding on the parties.
Mi-Space (UK) Ltd v Bridgwater Civil Engineering Ltd  EWHC 3360 (TCC) involved a groundworks contract for a residential development. The contract provided for a series of payments to be made to Bridgwater. Mi-Space failed to contest the December payment and subsequently failed to pay the amount due so Bridgwater commenced adjudication for the amount owing. Bridgwater was successful in adjudication and when it sought to enforce the adjudication determination in the Court Mi-Space countered alleging that the dispute had been settled by an earlier email exchange.
The key question for the Court was whether the parties had reached agreement to settle the dispute. Key facts are:
- December 2014 – Bridgwater claim not properly disputed and Mi-space fails to pay.
- 27 February 2015 – without prejudice meeting where parties fail to agree.
- 2 March 2015 – without prejudice emails, no agreement and Bridgwater suspends work.
- 3 March 2015 – emails agree to settle for £2,350,000 payable in instalments with ‘formal acceptance in writing’.
- 6 March 2015 – Mi-space makes first payment and Bridgwater return to site.
When Mi-Space sent through the formal agreement a week later Bridgwater refused to sign, alleging that no agreement had been reached. When a further meeting failed to resolve this Bridgwater filed the adjudication.
Key legal points
Contract interpretation (including deciding whether an agreement has been reached) will often turn on the facts of the case. However, there are a few key principles that will apply universally:
- The parties dealings will be viewed objectively, subjective intention is not relevant.
- Court will be reluctant to depart from the ordinary meaning of contracts.
- The courts will strive to give effect to agreements that have freely entered into, especially in a commercial context.
While it is possible to make provisional agreements that are ‘subject to contract’ (i.e. no agreement until the written contract has been executed) the Court found that this was not the case here. On the facts it was clear that the parties had made an offer (for consideration) which was accepted by the other side and the parties intended to be immediately bound. Key factor leading to this decision were that the dispute required urgency (the project had been suspended) and the subsequent actions of the parties (making payment and returning to site).
While it is always good for parties to sort out any disputes between themselves, care should be taken in these discussions to ensure that you are happy with any agreements reached and are aware that these agreements, even if via email, can be legally binding.