- Published on
Courtney and Fairbairn Ltd v Tolaini Brothers (Hotels) Ltd (1974) Court of Appeal
The defendants, as property developers, sought to construct a motel, a gas station, and a hotel on a five-acre parcel in Hertfordshire. The plaintiffs, as building contractors, proposed to provide the defendants with a financing source for the development in exchange for securing the building contracts for the projects. The plaintiffs requested confirmation from the defendants regarding whether the introduction would result in a financial arrangement.
…you will be prepared to instruct your quantity surveyor to negotiate
fair and reasonable contract sums in respect of each of the three projects
as they arise. (These would, incidentally be based upon agreed estimates
of the net cost of work and general overheads with a margin for profit of
5%) which, I am sure you will agree, is indeed reasonable.
The plaintiffs sought written consent to their terms, which the defendants supplied. The finance was appropriately established between the defendants and the financier presented by the plaintiffs; however, the parties failed to reach an agreement on the terms for the building work, leading the defendants to engage a different contractor. It was determined that no enforceable contract existed to award the building work to the plaintiffs. The court would not enforce a simple agreement to agree. The price was deferred for subsequent negotiation, as stated by Lord Denning MR:
the price in a building contract is of fundamental importance. It is so
essential a term that there is no contract unless the price is agreed or there
is an agreed method of ascertaining it, not dependent on the negotiations
of the two parties themselves… A contract to negotiate, like a contract to
enter into a contract, is not a contract known to the law.
His lordship also pointed out that:
…if they had left the price to be agreed by a third person such as an
arbitrator, it would have been different.
The defendants, as property developers, sought to construct a motel, a gas station, and a hotel on a five-acre parcel in Hertfordshire. The plaintiffs, as building contractors, proposed to provide the defendants with a financing source for the development in exchange for securing the building contracts for the projects. The plaintiffs requested confirmation from the defendants regarding whether the introduction would result in a financial arrangement.
…you will be prepared to instruct your quantity surveyor to negotiate
fair and reasonable contract sums in respect of each of the three projects
as they arise. (These would, incidentally be based upon agreed estimates
of the net cost of work and general overheads with a margin for profit of
5%) which, I am sure you will agree, is indeed reasonable.
The plaintiffs sought written consent to their terms, which the defendants supplied. The finance was appropriately established between the defendants and the financier presented by the plaintiffs; however, the parties failed to reach an agreement on the terms for the building work, leading the defendants to engage a different contractor. It was determined that no enforceable contract existed to award the building work to the plaintiffs. The court would not enforce a simple agreement to agree. The price was deferred for subsequent negotiation, as stated by Lord Denning MR:
the price in a building contract is of fundamental importance. It is so
essential a term that there is no contract unless the price is agreed or there
is an agreed method of ascertaining it, not dependent on the negotiations
of the two parties themselves… A contract to negotiate, like a contract to
enter into a contract, is not a contract known to the law.
His lordship also pointed out that:
…if they had left the price to be agreed by a third person such as an
arbitrator, it would have been different.
0 Comments