Jarvis Interiors Ltd v Galliard Homes 
Galliard were developing Old Sun Wharf into 36 flats. On 11 January 1995 Galliard sent Jarvis an invitation to tender. The invitation included a document titled “Contract Preliminaries”. The Preliminaries provided inter alia that the contract would incorporate the JCT conditions as amended and that
“The Contract will be executed as a deed under seal”. After further negotiations on 14 March 1995 Galliard issued a letter of intent which provided “In the event that we do not enter into a formal contract with you through no fault of Jarvis Interiors, you will be reimbursed all fair and reasonable costs incurred and these will be assessed on a quantum meruit basis”.
Further discussions took place during March to November 19995 during which period Jarvis carried out and completed work to some of the flats. On 1 December 1995 the parties shook hands on a price of £1.325 million. On 8 December 1995 Galliard wrote to confirm this figure and invited Jarvis to sign and return the letter. Jarvis did not do so. On 19 March 1996 Galliard’s QS sent to Jarvis articles of agreement, contract sum analysis, drawings and a specification for signature and proposed a supplementary agreement to accommodate inter alia the guaranteed maximum price. In June 1996 Galliard purported to terminate the contract under clause 184.108.40.206 of the JCT Conditions. Jarvis said there was no contract and issued a writ for the work it had done on the alternative bases either that there was a contractual right to payment pursuant to the letter of intent or on a quantum meruit. Galliard applied for a stay under s.4 of the Arbitration Act 1980.
Galliard argued that a formal contract incorporating an arbitration clause came into existence when the provision in the preliminaries that a contract would only eventuate once the parties entered into a deed was overtaken by the ‘handshake agreement’..
The Court of Appeal disagreed.
Lindsay J (with whom Schiemann LJ and Evans LJ agreed), having noted the “broad disposition to find a contract if one can” found
(a) that the effect of the provisions in the preliminaries was that there could be no contract unless and until there was a deed between the parties – the effect was akin to the phrase ‘subject to contract’ and
(b) that nothing that occurred afterwards overtook that – this included the ‘handshake agreement’ which was itself subject to a formal contract being entered into.
It is important to note, however, that Galliard did not seek to argue that an interim contract came into existence when Galliard acted on the Letter of Intent. Evans LJ clearly thought this argument would have succeeded: see paragraph 8 of his judgment.