STAY TO ARBITRATION

07-06-2012 09:05

Merit Process Engineering Limited -v- Balfour Beatty Engineering Services (HY) Limited [2012] EWHC 1376 (TCC)

In this case the Defendant, Balfour Beatty Engineering Services (HY) Limited (“Balfour Beatty”) applied for an Order staying the Court proceedings brought by the Claimant in this matter, Merit Process Engineering Limited (“Merit”) so that the disputes between the parties might be resolved by Arbitration rather than by Court proceedings.  

The disputes between the parties related to three contracts entered into by the parties, however, the main dispute between the parties related to one package of works referred to in the claim as the “main installation package”.  

The main issue that the court had to consider was whether in respect of each of the disputes and each of the contracts underlying the disputes a valid arbitration clause had been agreed by the parties.  No formal signed contract was in evidence in respect of the “main installation package”.

The issue for the court to consider in respect of the “main installation package” was whether the parties had contracted on the terms of a letter of intent or whether a formal contract had been concluded by the parties.  Merit had commenced its works pursuant to the terms of a letter of intent and the parties carried on negotiations with a view to concluding a contract but failed to reach an agreement as to the contract sum due to a disagreement over a sum in the region of £40,000 on a £1.6milion contract.  Merit never signed or returned contract documents to Balfour Beatty.  Balfour Beatty argued that the difference between the parties positions was relatively limited and that all other terms had been agreed and therefore the court should consider that the contract between the parties was agreed and binding.  The judge concluded however as they had not agreed on the price the parties had not concluded a binding agreement.  The work was carried out under the terms of the letter of intent.  Accordingly, no arbitration clause was agreed by the parties and accordingly the Defendants application for a stay of the proceedings in so far as they related to the main installation package failed.  

The other work packages were carried out pursuant to the terms of agreed contracts which included valid and binding arbitration clauses and the defendant’s application for stays in relation to disputes pursuant to those works packages succeeded.  

It is important to ensure that when negotiating a commercial contract that is intended to incorporate terms which are important to you that the contract is concluded and/or the terms that are important to you are incorporated in whatever agreement exists between the parties.  

If you would like any further information on this issue, please contact Philip Vickers.

 

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