British Steel Corp v Cleveland Bridge & Engineering Co Ltd [1984] 1 All ER 504

• Cleveland Bridge & Engineering (C) asked British Steel Corp (B) to commence making metal nodes for them, pending a contract on C’s standard terms which would be sent later. B performed the work but delivered it late which caused damage to C exceeding the value of the contract that it asserted existed.

• No terms were ever agreed on by the parties.

• C refused to pay for the nodes which had been delivered to it.

• The court held that:

  1. There was no contract because the price, and other essential aspects, hadn’t been agreed, since Goff J established that in “the vast majority of business transactions…the price will indeed be an essential term”.

  2. That B should be paid following an “unjust enrichment” claim: where one party begins work under the impression that a contract will be agreed upon and this materialises, all the work done will be treated as though having been done under that contract. Where, as here, no contract is agreed upon, then the party who requested the work is to pay a “reasonable sum…in restitution”. This is to prevent a party in B’s situation being left out of pocket for work done.

Goff J

• Also stated that if possible considering its content, a letter of intent (i.e. we would be interested in you producing X for us) could be used to establish a unilateral or ordinary contract if it included enough of the essential terms and was agreed to by the other party. 

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Problems: this fails to compensate a party such as C who, as a result of the manufacturer’s late work, lose out, as here. Restitution should be awarded to compensate for noth parties’ losses caused by the other party where there is no contract. In the event, C did sue for the losses caused by B, but under “breach of contract, which was impossible there being no contract.