A binding contract or an agreement to agree?

NHS24 enter into a multi-million pound contract to acquire bespoke call-handling software but did the agreement properly reflect what was agreed or not?

NHS24 v. Capgemini UK PLC [2015] CSOH 54

In 2014 NHS24, (the ‘Pursuers’) brought an action of Declarator against Capgemini (the ‘Defenders’) over the terms of a contract they had entered into.

The Pursuers are a telephone based triage and clinical assessment service for the National Health Service in Scotland. In 2010 the Pursuers began negotiations for the Defenders to provide a new computer management system. It was a high profile deal with a £30M headline value where the Defenders were to design software for their new system. The parties signed the contract on 2 March 2012 (‘the Agreement’). Importantly, the parties agreed that the Agreement would evolve as the precise specification would change as the system was developed. The revised specification was contained in the ‘Business Blueprint’.

The dispute centres around two discrete performance requirements: One related to the number of calls that the system could handle at any one time (‘concurrent calls’) and the other related to the time taken to complete certain tasks (‘response time’). Both of these requirements were contained in a document called the Output Based Specification (‘OBS’). The Pursuers issued the OBS at the start the contract negotiations. Crucially, however, neither of the specific performance requirements in the OBS made it into the final Agreement.

The Pursuers argued that the omission, from the Agreement, of both of those requirements was an obvious error and, in any event, that they had actually been incorporated into the contract through other documents. Alternatively, the Pursuers argued that the parties had had a common intention to include both ‘performance requirements’ and they sought rectification on that basis. The Defenders sought dismissal of the action as they maintained that, on a proper construction, neither of the ‘performance requirements’ were properly incorporated into the Agreement. They also said that there was no relevant case for rectification.

The Pursuers, in support of their first argument, advanced that a ‘reasonable person aware of the facts’, including the background circumstances, would regard it as ‘patently nonsensical’ for NHS 24 to enter into a major software contract without detailed ‘performance requirements’ such as those for ‘response times’ and ‘concurrent calls’. It was argued that such an Agreement would be contrary to ‘commercial sense’. The Pursuers emphasised that it was a question of contract construction citing Chartbrook Ltd v Persimmon Homes Ltd [2009] 1 AC 1101 (paras 21 - 25). In those passages Lord Hoffmann stated that the correction of an obvious mistake is part of the overall process of contract construction which involves looking at the relevant background circumstances in each case; ‘All that is required is that it should be clear that something has gone wrong with the language and that it should be clear what a reasonable person would have understood the parties to have meant.’

The Pursuers also argued that, in any event, the ‘performance specification’ terms had actually been incorporated into the Agreement through two other documents, namely the ‘Traceability Matrix v2.5’ and the ‘Technical Blueprint’. In the Pursuers’ argument, in the alternative, for rectification they said that they had a relevant case for rectification under the Law Reform (Miscellaneous Provisions) (Scotland) Act 1985 as they could prove that the parties had agreed a great many technical aspects in the months leading up to the execution of the Agreement. The Pursuers put forward that they had intended that the signed document should reflect all those aspects and, furthermore, that the two ‘performance requirements’ had only been omitted because of a simple proofreading failure. The Defenders said, in response, that it had been entirely intentional that neither ‘performance requirement’ was incorporated into the Agreement. Counsel for the Defenders criticised the Pursuers alternative rectification claim as being irrelevant and lacking specification. It was asserted that there had been no common intention and the Agreement was incapable of being rectified in the manner sought.

In his decision, Lord Woolman stated that the courts should be slow to hold that parties have made linguistic errors in formal contract documents. He went on to add that he did not think that the citing of ‘Chartbrook’ by the Pursuers was on point: The OBS was not a static document and was, ultimately, to be replaced by the Business Blueprint after a certain trigger event. Lord Woolman thought that any ‘reasonable person’ would see that the omission of the technical specification was because the final technical specification still to be agreed.

It may have been the Pursuers intention that both the ‘performance requirements’ should be part of the final Agreement but, however, and importantly, the Defenders had not. The Defenders did not want to be bound by those requirements that they perceived they could not meet and it was not in the Defenders’ commercial interests to do so as they foresaw that they could find themselves in breach of a contract which they could not cure. Lord Woolman concluded that by approaching construction from the perspective of ‘commercial sense’ it did not, as asserted by the Pursuers, yield a different result.

The Pursuers also tried to found upon the parties’ prior communications where they maintained that those were properly part of the background circumstances which would have been known to the nominal ‘reasonable person’. His Lordship considered, however, that there was a formidable obstacle to that approach due to Clause 61 of the Agreement. Clause 61 was a comprehensive ‘entire agreement’ clause which stipulated that the Agreement ‘supersedes all prior representations, communications, negotiations and understandings.’ Furthermore, the parties expressly agreed that that they did not rely on ‘any statement or representation’ before entering the Agreement. Against the background of s1(3) of the Contract (Scotland) Act 1997, Clause 61 excludes consideration of such material.

If there is no obvious mistake then there can be no correction. To require the Defenders to be bound by the requirements that were not present in the Agreement when they signed it is something that Lord Woolman is wary of doing. Lord Woolman concluded that, ultimately, it would be necessary to hear evidence to determine whether or not there had been an obvious and manifest error and that what was agreed between the parties was not what was in the Agreement. Turning, however, to rectification, Lord Woolman held that The Pursuers had, at least, made out a relevant case in terms of the Law Reform (Miscellaneous Provisions) (Scotland) Act 1985 and he rejected the Defenders view that where was no common intention that the Agreement was incapable of being rectified. That was on the basis that the Pursuers were offering to prove that the parties had actually agreed the matters in question in the months leading up to the execution of the Agreement and that the two ‘performance requirements’ had only been omitted due to a proof reading error. His Lordship decided that those matters could only be decided after evidence has been heard e.g. obvious error and also, whether or not, the ‘performance requirements’ had in fact been incorporated through other documents. The result was that a PBA was fixed by his Lordship.

This information is intended as a general discussion surrounding the topics covered and is for guidance purposes only. It does not constitute legal advice and should not be regarded as a substitute for taking legal advice. DWF is not responsible for any activity undertaken based on this information.

Kenneth Campbell


As a commercial litigation specialist I regularly appear in Sheriff Courts around Scotland as well as conducting actions in the Court of Session.