Tomlin v Standard Teles & Cables Ltd  1 WLR 1378
Intention to create legal relations in the formation of contracts.
A man claimed against his employers for damages for personal injuries sustained during the course of his employment. The man’s solicitor and the agent of the employer’s insurance company began negotiations. The agent of the insurance company wrote numerous letters, some of which accepted liability of the employer on a “50/50” basis, leaving only the question of quantum to be finalised. All letters written by the agent of the company were written with the words “without prejudice,” pursuant to which the agent claims that there can be no binding agreement between the Parties and the letters are inadmissible to the case.
The question arose as to the effect of the words “without prejudice” on (1) the admissibility of the letters and (2) the existence of a binding agreement between the parties.
Firstly, the letters were admissible before the Court because the question is the existence of a binding agreement in those letters. Secondly, the Court held the use of the words “without prejudice” solely have the effect of excluding an offer by the letter’s writer, if the other party does not accept the offer. However, if the party to which the “without prejudice” offer is made accepts the offer, then a binding agreement is mutually reached. Thus, the words “without prejudice” did not preclude the intention of the parties to agree to liability on a “50/50 basis,” with solely the question of quantum to be determined. The Court emphasised that the subsequent correspondence of the parties also implicitly accepted that basis of liability, with the Parties negotiating on the basis of a concluded agreement. Thus, the letters constitute a mutually-reached binding agreement on the basis of liability, and the words “without prejudice” do not preclude this binding effect.
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