British Steel supplied a quantity of cast steel nodes to Cleveland Bridge pursuant to a Letter of

Intent which read:

We are pleased to advise you that it is the intention of Cleveland Bridge & Engineering Co Ltd
to enter into a sub-contract with your Company for the supply and delivery of the steel castings
which form the roof nodes on this project. The price will be as quoted in your telex dated 9th
February 79 The form of sub-contract to be entered into will be our standard form of subcontract for use in conjunction with the ICE General Conditions of Contract, a copy of which is
enclosed for your considerationand we request that you proceed immediately with the works
pending the preparation and issuing to you of the official form of sub-contract
The parties negotiated about the terms of the sub-contract but a formal contract was never
agreed. British Steel supplied the steel nodes but for various reasons delivery was delayed.
British Steel claimed what it alleged was the contract price of the steel nodes. Alternatively, it
claimed the same sum as a quantum meruit. Cleveland Bridge counterclaimed a far greater sum
as damages for British Steels alleged breach of contract in delivering the steel nodes late and out
of sequence.
At trial Cleveland Bridges case was that there was a concluded contract between the parties with
the result that they were entitled to claim damages for breach of contract. British Steels case was
that no contract existed and that they were entitled to the sum claimed as a quantum meruit.
Robert Goff J held that the contract (if any) which may come into existence following a letter of
intent may take one of two forms either there may be an ordinary executory contract or there
may be what is sometimes called an if contract, i.e. a contract under which A requests B to
carry out a certain performance and promises B that, if he does so, he will receive a certain
performance in return. He held that there was no binding executory contract since the
defendants letter of intent asked the plaintiffs to proceed immediately with the work pending the
preparation and issuing of a form of sub-contract, being a sub-contract which was plainly in a
state of negotiation, not least on the issues of price, delivery dates, and the applicable terms and
conditions. Since the parties were still in a state of negotiation, it was impossible to say what
the material terms of the contract would be, and by starting work the plaintiffs did not
bind themselves to complete the work. He held that there was no if contract when, in a
case such as the present one, the parties were still in the state of negotiation; it was
impossible to predicate what liability (if any) would be assumed by the seller for, e.g.
defective goods or late deliver if a formal contract should be entered into.
Accordingly there was simply an obligation on the part of Cleveland Bridge to pay a reasonable
price for the work done and materials delivered. The counterclaim accordingly failed.