|[Home] [Databases] [World Law] [Multidatabase Search] [Help] [Feedback]|
Scottish Court of Session Decisions
You are here: BAILII >> Databases >> Scottish Court of Session Decisions >> Royal Bank of Scotland Plc v Carlyle  ScotCS CSIH_75 (12 September 2013)
Cite as:  CSIH 75, 2013 GWD 31-617,  ScotCS CSIH_75, 2014 SC 188, 2014 SCLR 167
[New search] [Context] [Printable version] [Help]
SECOND DIVISION, INNER HOUSE, COURT OF SESSION
Lord Justice Clerk
OPINION OF THE COURT
delivered by LORD CARLOWAY,
the LORD JUSTICE CLERK
in the reclaiming motion by
ROYAL BANK OF SCOTLAND PLC,
Pursuers and Reclaimers;
WILLIAM DEREK CARLYLE,
Defender and Respondent:
Reclaimers: Duncan QC; Brodies LLP
Respondent: Howlin QC, Wilson; Cartys, Blantyre
12 September 2013
 The defender was a property developer, specialising in private housing. For some years in advance of the circumstances giving rise to this action, he had carried out certain building projects with the assistance of loan finance from the pursuers. Typically, the defender would buy land upon which to build a new house, arrange for the house to be built, live in it for a limited period and then sell it at a profit.
 The pursuers seek repayment of sums of £845,000 and £560,000, together with interest, which they lent to the defender in or about August 2007 for use in the purchase of a plot of land at Gleneagles. The loans were the subject of standard securities over the plot itself, a neighbouring plot and certain lands at Bothwell, which were also being developed by the defender. The pursuers contend that the loans were, and are, governed by two written agreements dated 24 and 25 July 2007.
 The defender admits the existence of the two agreements and their nature as relative to the sums advanced (see Answer 2). However, he resists the pursuers' claim on the basis that he is entitled to, and counterclaims for, damages of £1,500,000 in respect of a material breach by the pursuers of a "collateral warranty" (see defender's plea-in-law 2 and counterclaim plea 1) given by the pursuers to the defender. This warranty, which is specifically described as an "assurance" (see also Ans 2, counterclaim Conds 6 and 7), is averred to have been given by the pursuers in advance of the signing of the agreements; notably, but not exclusively, during a telephone conversation between the defender and an employee of the pursuers, namely Helen Hutchison, on 21 June 2007. The import of this assurance, according to the defender, was that the pursuers would, in addition to the sums lent to buy the land, advance to the defender further "funding for the development".
 In his counterclaim, the defender makes extensive, detailed averments about his discussions with the pursuers' employees in the months immediately preceding the signing of the agreements. He avers that he repeatedly told the pursuers that he required finance for the whole project, including funding for the building works, for it to be viable as a business venture. He maintains that he entered into the two agreements on the strength of the assurance and that he would not have done so had the assurance not been given.
 It is not disputed that the pursuers did not provide any further funding. As a result, the defender avers (counterclaim Cond 8), the development could not proceed. He incurred expense, which is not fully specified in the pleadings, in the form of professional fees and the cost of ground works. More significantly, the defender avers that he lost a profit of some £1.2M, which, he maintains, he would have secured had the development proceeded. It is not clear what has actually happened to the plot. The sellers had reserved a right to re-purchase (buy-back) the land (see infra) in the event that the building was not completed by a date long since passed. However, presumably, the pursuers' securities over the plot (see also infra) remain in place.
 By interlocutor dated 19 May 2009, the commercial judge allowed the parties a proof before answer "of their respective averments". This would normally be taken to cover the averments in both the action and the counterclaim and this appears to have been the intention (Opinion ( CSOH 3) para ). The defender was ordained to lead at the proof. The proof proceeded in October 2009, after which, on 13 January 2010, the commercial judge issued his principal Opinion and appointed the cause to call "By-Order". Notwithstanding the earlier interlocutor, and for reasons which remained obscure at the Summar Roll hearing, the evidence and submissions at the proof did not cover quantum of damage. At the By-Order hearing on 18 January, the defender was permitted to "adjust" his averments on quantum and the commercial judge continued "consideration of the formulation of any substantive interlocutor".
 On 10 May 2010 (see explanatory Note of 6 August 2010 ( CSOH 108)), the commercial judge refused to allow the pursuers to amend their own averments on quantum by maintaining that, if there were a collateral warranty, the conditions for any building funding would not have been met by the defender, given the state of his indebtedness and the progress of his other developments, at the time of any prospective draw down. The commercial judge allowed the defender to amend his counterclaim by adding a declaratory conclusion. He then sustained the first plea-in-law to the counterclaim:
"insofar as to Find and Declare ... that the Pursuers are in breach of a collateral warranty in terms of which they bound themselves to make development funding of ... £700,000 ... available to the Defender by way of loan for the purposes of the development of [the plot]".
Despite the terms of the interlocutor of 19 May 2009, the commercial judge allowed the parties another proof; this time (again before answer) on "their respective averments in respect of causation and loss" (presumably quantum of damage). He granted leave to reclaim (appeal) and the pursuers have so reclaimed.
 Meantime, on 2 November 2009 at the Sheriff Court in Hamilton, the defender's estates were sequestrated. On 8 February 2011, following extensive procedure in that court, a petition by the defender for recall of his sequestration was refused. The court understands that the delay in the progress of this reclaiming motion has, at least in large part, centred upon the defender's difficulties in securing funding. A Summar Roll hearing was originally set down for 9 March 2011, but discharged in order to ascertain the position of the defender's trustee. Thereafter, the defender made repeated, and ultimately successful, attempts to secure legal aid. A new Summar Roll hearing was appointed in August 2012 to take place in May 2013, but the latter was effectively adjourned until 9 July 2013 to enable the defender to secure legal representation.
The commercial judge's findings in fact and their
 The defender's proof commenced with his own testimony; consisting of a relatively concise examination-in-chief (some 40 pages of transcript) and a lengthy cross-examination (170 pp) much of which does not, at least now, appear to be relevant to the issues upon record. The second witness was the defender's accountant, namely Colin Hamilton. Nothing seems to have turned upon his testimony and the commercial judge does not afford it any individual treatment. The third and final witness was Ms Hutchison, who was an assistant director in commercial banking at the pursuers' Motherwell branch. Her testimony was in short compass (23 pp). The pursuers led no evidence. The commercial judge summarised the evidence (para ) under three headings, viz: "The defender's evidence"; "Ms Hutchison's evidence"; and "The Bank's internal documents". The last element has no present significance.
 The defender testified that he had met with Ms Hutchison (commercial banking) and Ms Young (private banking) in March 2007 concerning his proposal to develop two plots at Gleneagles; the one, which is under consideration here, by himself and the other through the offices of a company, namely Carlyco Limited, which he controlled. A schedule was presented to the pursuers with estimated land purchase prices and anticipated building costs of £700,000 for each house. The existence of a potential buy-back clause (at the original purchase price), which was being insisted upon by the sellers if the houses were not completed by March 2011, was discussed. The defender had stated (para ) that, if the pursuers were to provide funds for a deposit on the plots, then the balance of the price for the plots and the build costs "must" be provided as the houses "needed to be built". The defender asked for a "full commitment on the proposal or nothing". The defender had said words to the effect: "do not give me the money for the land unless you give me the money for the build". If the pursuers had proposed any qualifications to that element, the defender would not have proceeded. He would not have looked for alternative funding. Ms Hutchison had confirmed (para ) to the defender that the pursuers would "definitely have the appetite for the project", but she needed to refer it to head office (Edinburgh).
 The defender had submitted "tenders" (rather than formal missives) to purchase the plots. His tender of £1,350,000 for the plot under consideration here was accepted in April 2007, as was one for the other, Carlyco, plot of £995,000. The total purchase price was therefore £2.345M. A 5% deposit was needed upon conclusion of missives (which did include the buy-back clause). Towards the end of May, the pursuers told the defender that his deposit was "all sorted" (para ), but he had repeated the need for the purchase and building funding too, since neither the deposit money nor the purchase money was, on its own, "of use" to him. The defender stated (para ) that he had repeated this in a telephone conversation on 5 June, when he was told by Ms Hutchison not to worry, as the pursuers would not give him "the money just for the land". He had replied that he was not going to pay the deposit until the decision on funding the whole project was "through". It appears from the defender's testimony that it was originally anticipated that he would not require funds to purchase the land until December 2007 (Transcript of Evidence, Vol II pp 131-2). However, the sellers had successfully pressed for an early settlement date in late July/early August. There was then some time pressure in obtaining purchase funds.
 What transpired to be a critical telephone call occurred on 14 June 2007. In this, the defender said (para ) that Ms Hutchison had informed him:
"You'll be pleased to know it's all approved. Edinburgh are going for it for both houses".
The commercial judge's summary of what the defender took that to mean was that the pursuers were "supporting the whole proposal". On that basis the defender instructed his solicitor to pay the deposits on the plots and, at that point, he became "committed to the project".
 The precise response which the defender made to the question: "What did you take from that phone call?" in his testimony was:
"... that she had, as she had said she would do, she had put the proposal for the two houses for the full development to Edinburgh ... She'd told me that they were ... assessing it or whatever they do normally with it, and that was her coming back to tell me that they had approved it for going ahead, so, therefore, they had approved the development for both ... [Ms Hutchison] actually said at the meeting: '... [W]e'll propose it for the two houses and if they didn't' go for ... the two houses ... then ... you've always got the option of considering doing one', so that was her basically saying 'They're going for it for both houses', so it was the whole thing ... in the build and the sale." (I pp 25-26).
 The defender attended at the pursuers' offices on 21 June 2007 "to sign the paperwork". Although not referred to in the commercial judge's Opinion, the defender had said that, as at 14 June, he knew that "it would take time to get the paperwork organised" (II p 204). It is worthy of comment that, throughout his testimony, the defender's position was that, in all his past dealings with the pursuers, what had happened was that he had secured oral approval from the pursuers in relation to the prospective funding of a development, but the "paperwork", as he described it, would only follow once he actually needed the money (II p 156). He accepted that, in this context, if the pursuers had "to do it in this way and that way and all the rest of it, that's how it is" (II p 181). There was a "trust element there".
 The defender had a further conversation with Ms Hutchison on 21 June, when she had phoned "to effectively confirm the same thing, but it was also to say that the paper work was ready" (II p 205). This was a document (no 6/35 of process) headed "Credit Approved Indicative Terms for Carlyco Limited". It related to the advancement of "Bridging Finance" to Carlyco (ie not to the defender) of £2.587M for the purchase of both plots at £2.35M (see supra) plus costs. This facility was to reduce to only £700,000 on: the sale of a house in Bothwell; a personal advance from the pursuers' private wing in relation to another house in Bothwell; and the "self build" financing for the plot he was to develop personally at Gleneagles. Security was to be provided over the Bothwell properties, which the defender was still engaged in developing, and both plots at Gleneagles. According to the defender's testimony, it was only after he had signed this document that missives were concluded (I p 33).
 Although not detailed in the Opinion of the commercial judge, it is important to notice certain other aspects of this document. The Executive Summary describes the content of the document as containing "Indicative Heads of Terms to provide a facility to Carlyco". The facility does not contain any element for building funding. It specifies the interest rates applicable to the loan; being the pursuers' base rate plus 2% up to £1.645M and plus 3% "thereafter". It states that the "Facility Document To Be Prepared By Bank" was to be a "Facility Letter". It refers to a number of conditions precedent. It not only details the necessary securities but also requires certain financial convenants in the form of audited accounts. It specifies a large arrangement fee on draw down. It states that the "Representations and Warranties" were to be "Usual for facilities of this type". It concludes with the following:
"These Heads of Terms constitute a formal offer of facilities on behalf of the Bank
This indicative term's (sic) letter expires on 22nd June 2007
I agree to enter into a period of exclusivity with [the pursuers] until the conditions pre-cedent are satisfied and the [pursuers'] diligence concluded.
I confirm the proposed terms and conditions outlined are acceptable and undertake to provide the information detailed to allow the Bank to conclude diligence and proceed to draw down".
The defender's signature is appended immediately below this.
 The defender said that he was not concerned about signing this "paperwork" only for the purchase price because of his reliance on "the assertion by Ms Hutchison in her telephone call that all was agreed". According to the defender (para ):
"This was the way in which funding had been provided for the earlier project ... where the [pursuers], having agreed in principle to provide funding for the purchase and build costs, had done the paperwork for the purchase first and, later and quite separately, done the paperwork for the build (development) cost. The defender said that the final amount of the development funding was not confirmed at this stage. This, too, was how it had happened in the past. It needed to be worked out exactly in due course depending on the final costings and input and on what came in from the sale of [the Bothwell property etc]. However, the [pursuers were] well aware of the estimate of £700,000 from the initial proposals".
 The Indicative Terms were followed by the signing of the two agreements (nos 6/32 and 33) on 24 and 25 June 2007, which take the form of an offer and acceptance, for the advancement to the defender of sums of £845,000 and £560,000 "to assist with the purchase of" the plot; with repayment 12 months from the draw down of the monies; security over the Bothwell properties and the plot; with interest at 2% above the pursuers' base rate from time to time. The terms provided for repayment in certain other circumstances.
 Again, although not detailed in the commercial judge's Opinion, certain aspects of the agreements require to be noted in order to understand properly the nature of the dealings between the parties and, in particular, the scope of any legal obligations arising. The first page starts with a heading:
"THIS IS AN IMPORTANT DOCUMENT. YOU SHOULD ... SIGN ONLY IF YOU WANT TO BE LEGALLY BOUND"
It then states that it is an "offer" which details the terms and conditions upon which the pursuers are "able to offer" to the defender "a personal secured loan (the 'mortgage')". It states that it explains the parties' rights and responsibilities relative to that loan. It continues:
"This offer is valid for 3 months... You are free to decline this offer...".
It then stipulates the "OFFER DETAILS" as including the following:
"1 ... You are not bound by the terms of this offer document until you have signed and returned a copy to us.
We are required by the Financial Services Authority ... to provide you with this offer document.
You should compare this offer document with the key facts illustration given to you before you applied for this mortgage, to see how the details may have changed".
Having stated the defender's requirement as being the purchase of the plot and specified the repayment date, the securities required and the estimated values of the properties over which security was to be granted, it continues:
"Any changes to the information you have given us, including any changes to the value of the property to be taken as security, could alter the information in this offer. If this is the case, please ask for a revised offer".
The document then contains certain "GENERAL TERMS" as follows:
A1 The [pursuers] shall not be obliged to provide the mortgage unless the following conditions are satisfied on the date on which the mortgage is drawn:-
(i) the [pursuers have] received the duplicate of this offer signed by you.
(ii) the availability as security for the mortgage of any existing security is confirmed ...
(iii) any new security to be granted ... is valued and completed ...
(iv) ... no Event of Default (or event which may result in an Event of Default) has occurred or may occur as a consequence of the mortgage being drawn.
B.1 The mortgage will require to be drawn down in one amount within 3 months from the date this offer is signed on behalf of the [pursuers], otherwise the [pursuers] shall not be obliged to provide the mortgage".
The securities in respect of the obligations of the defender to the pursuers are detailed. The pursuers' ability to declare the sums immediately repayable if an "Event of Default" occurs is expressed; such an event including insolvency, a failure by the defender to meet any other obligations owed to the pursuers or, more generally, circumstances which might reasonably lead to the pursuers to believe that the security might be prejudiced or the obligations under the offer not met.
 The offer ends with the following:
"By signing and returning a copy of this offer, you will be entering into a legally binding agreement with [the pursuers] for the mortgage on the terms and conditions detailed in this offer. You are not bound by the terms of this offer until you returned (sic) a signed copy of the offer to us".
The offer is then signed on behalf of the bank and dated 24 July 2007. The document continues:
I/We have read and understood the above terms and conditions on which the mortgage is offered to me/us by [the pursuers] and have decided that the proposed borrowing is appropriate and in my/our best interests. I/we confirm acceptance of the offer on the above terms and conditions and agree to comply with our obligations as set out in these terms and conditions.
Sign only if you want to be legally bound by the terms of the offer".
The defender signed immediately under this section on 25 July 2007.
 In about November 2007, the pursuers began asking the defender when he required the building funding and he advised that this would not be until March 2008. However, cutting a long story short, in August 2008, the defender was told that no further funding would be made available.
 The commercial judge described (para ) Ms Hutchison's evidence as "largely supportive of the defender's position". In particular, she stated that the pursuers would not have advanced the funding to purchase the plots "if they did not have the intention or appetite to fund the development". Her recollection of the telephone call of 14 June 2007 was that she had told the defender that the pursuers had approved funding for the purchase. However, the commercial judge understood (para ) the tenor of her evidence to be that the defender was told on various occasions that funding for the development would be advanced. This, he regarded as a matter of considerable importance. Her written witness statement had qualified this by stating that the defender had been told that funding would be advanced, although no amount was specified and that he "would have to deliver on a couple of things to allow the funding level and structure to be discussed in depth". "The intention (sic) was that the [pursuers] had an appetite to cover the development funding" (witness statement para (b)). She recalled the defender saying that the pursuers should not give him the money for the purchase without funding for the development, although this was at about the time when the Indicative Terms were signed. Ms Hutchison said that no absolute assurance of development funding was given, but in principle there was a general understanding that there would be development funding in due course, with the details still to be worked out. The level of funding would depend on the defender's financial position at the time when the money was required. However, the defender's understanding would have been that the pursuers would provide development funding "subject to terms and conditions to be worked out ... in due course".
 At the end of his summary of the testimony of the defender and Ms Hutchison and his narrative of the pursuers' internal documentation, the commercial judge engages in a "Discussion", which commences as follows:
" I accept the evidence led on behalf of the defender. The defender himself impressed me as an honest and, in the main, reliable witness".
The commercial judge prefaces a further reference to the defender's evidence by stating (para ) that it was "clear beyond a shadow of a doubt" that, on at least one occasion "before committing himself to the purchase", the defender had said to Ms Hutchison and/or Ms Young "words to the effect: 'do not give me the money for the purchase unless you are going to give me the funding for the development' ". Ms Hutchison was afforded a certificate of patent honesty and the commercial judge regarded her testimony as being "substantially corroborated by that given by the defender" (para ).
 The commercial judge narrates the import of the defender's evidence as follows:
" His evidence, in short, was that, because of the buy-back clause, he could not afford to take a loan to pay the deposit, or to pay the balance of the purchase price, without being sure that he could borrow to complete the development. Otherwise he would stand to lose a great deal of money. He explained this to Ms Hutchison, though it hardly needed explaining because the [pursuers were] aware of the buy-back clause and of the consequences, both to the defender and to the [pursuers], of the development not being completed. Ms Hutchison said that she understood. ... [I]t was said on at least one occasion ... before the defender committed himself to the purchase. ... [I]f [Ms Hutchison] had a reservation as to whether or not the [pursuers were] committing [themselves] to the funding, that should have been made clear to the defender. ... [H]e was fully entitled to believe, and did believe, from the conversation on the telephone on 14 June 2007, set in the context of the previous discussions, that the [pursuers] were committing themselves to supporting the whole project, that is to say both advancing the purchase price and providing a facility for the build cost".
 The commercial judge had no hesitation in preferring the evidence of the defender to that of Ms Hutchison whereby, in that telephone conversation, she had said that "funding for the development had been approved ('it's all approved')" and not just for the purchase. The commercial judge considered that Ms Hutchison's version of the call "makes little sense". He explains that:
" ... I find it much more credible that Ms Hutchison gave the defender to understand during that telephone conversation that funding for the whole project, including the development, was approved. She may not have said it in precisely those terms. The defender's evidence was that she said: 'You'll be pleased to know that it's all approved, Edinburgh are going for it ...'. I accept that evidence. Against the background of previous discussions, the parties' knowledge of the buy-back clause, and the [pursuers'] awareness that a commitment to fund the deposit and the purchase was of no use to the defender unless there was also a commitment to fund the development, a statement that 'it's all approved' and that Edinburgh were 'going for it' would have made it clear to the defender that the [pursuers were] committing [themselves] to funding the development and not just the purchase. And the [pursuers], through Ms Hutchison, ought to have realised this even if they did not in fact intend to convey this impression".
When he came to deal with what was actually in the "written loan documentation signed by the defender", the commercial judge accepted, as he was bound to do, that:
" ... its terms did not mirror the oral assurance given by the [pursuers]. They related to funding for the purchase price, not for any development costs. But the defender explained ... that previous funding had been dealt with in the same way - an oral commitment to purchase and development funding, followed by written loan documentation relating only to the advance of the purchase price and, only later, further written documentation for the development funding. There was nothing in the documentation which he signed which should ... have caused him to question the [pursuers'] commitment to the development funding. There was no reason, as he put it, 'for alarm bells to ring'".
The commercial judge's consideration of the law and his conclusions
 At the proof, the pursuers were content to accept (para ) that there existed in Scots law a legal concept called a "collateral warranty" which could be created if a party to a contract provided antecedent assurances to the other about matters not covered by the contract. The commercial judge was referred by the defender to a number of cases, all under English law, and notably to dicta of Lord Denning MR in Dick Bentley Productions v Harold Smith (Motors)  1 WLR 623, (at 627) and J Evans & Son (Portsmouth) v Andrea Merzario  1 WLR 1078 (at 1081). However, it is worth observing in limine that the commercial judge may have been uneasy with this concept as he refers almost immediately in his analysis not just to a collateral warranty, which is what is pled on record, but to a collateral contract, misrepresentation inducing contract and promise, none of which is pled. He expands on this as follows:
" There is no magic in a collateral warranty or contract. It is simply a contract, usually oral, which is collateral or ancillary to another contract (the principal contract) between the same parties. Its existence, formation and interpretation are governed by the same rules as apply to similar questions in relation to other contracts. Its peculiarity, if it can be called that, lies in its relationship to another (the principal) contract between the parties. Classically, a collateral contract is derived from a representation or promise made by one party to the other in the course of the negotiations for the principal contract, which representation or promise is intended to have binding effect (notwithstanding that it is not included in the terms of the principal contract), on the strength of which the person to whom the representation or promise is made agrees to enter into the principal contract".
 The commercial judge did note the words of caution delivered by Lord Moulton in Heilbut, Symons & Co v Buckleton  AC 30 (at 47) upon the rarity of collateral contracts. He went on to quote the five propositions which Lightman J identified in Inntrepreneur Pub Co (GL) v East Crown  2 Lloyd's Rep 611 (at para 10) as pertaining to "pre-contractual promises or assurances as collateral warranties" and continued:
" I have already found that in the telephone conversation of 14 June 2007, Ms Hutchison made a statement which, viewed objectively in the context of what had gone on before, meant that the [pursuers were] committing [themselves] to providing the development funding ... The defender was entitled... to take the view that the state of his indebtedness was a matter which the [pursuers] had already taken into account. The [pursuers] knew from what the defender had said on more than one occasion, that the defender was not going to go ahead with the purchase unless he had an assurance that he would get the development funding. In those circumstances I have no doubt that, viewed objectively, the [pursuers'] statement (which was reasonably interpreted to be such an assurance) was intended to be binding or, as it is sometimes put, to have contractual effect; and was reasonably understood as such...
 ... the defender has made good his case that the [pursuers] gave him an assurance that funding would be made available for the development ... in an amount of up to £700,000. [The pursuers] did so in circumstances where [the pursuers] knew (or ought to have known) that he was waiting for such an assurance before committing himself to the purchase. [They] knew, therefore, that he would rely on that assurance in going ahead with the purchase and entering into loan agreements with the [pursuers]. He did rely on it in the manner anticipated. The case for collateral warranty had (sic) been made out".
Under reference to R & J Dempster v Motherwell Bridge and Engineering Co 1964 SC 308 (LP (Clyde) at 328), the commercial judge did not consider that the absence of an express agreement on the amount of the loan, the term of that loan or the rate of interest rendered the "promise or assurance" (para ) too vague.
 In his subsequent Note (supra), the commercial judge addressed the issue raised by the pursuers of whether what the pursuers had undertaken was a unilateral promise or a bilateral agreement. He responded (para ):
"I had decided that the [pursuers] had given an unconditional commitment (emphasis added), and although I had put it in terms of a bilateral agreement it did not seem to me to make any difference if it were put in terms of a unilateral promise in circumstances where the defender had proceeded with the transaction on the strength of the promise".
 The pursuers contended that the interlocutor of 10 May 2010 should be recalled and the pursuers assoilzied from the conclusion for payment in the counterclaim. Decree de plano should be pronounced in the principal action. The amount now due was £1.9M; although this was not conceded by the defender.
 In order to succeed, the defender had to demonstrate the enforceability of the obligation upon which he founded. According to the defender, the obligation included three features. First, the pursuers were bound to lend to the defender £700,000 or thereby at an unspecified time in the future and no matter what had intervened prior to draw down. Secondly, although it might be thought that the nature of this obligation was loan, it was something different and called a collateral warranty. Thirdly, contrary to the other arrangements between the parties, this obligation was not recorded in writing, nor was it explicit. Rather it was implicit from the use of three words, viz: "It's all approved".
 The pursuers advanced two propositions (Ground of Appeal 2). First, the defender had failed to prove this so called collateral warranty. The commercial judge's findings in that regard were not justified by the evidence. It was accepted that there could be a promise collateral to a principal agreement, such as a letter of obligation (Mason v A & R Robertson 1993 SLT 773, Lord Cameron at 778). That was a unilateral obligation (McBryde: Contract (3rd ed) para 2-03). It was not clear in what way the obligation alleged by the defender was bilateral. No obligations upon the defender had been identified by the commercial judge. It was not easy to distinguish between collateral and additional obligations (Perdikou v Pattison 1958 SLT 153; McInally v Esso Petroleum 1965 SLT (notes) 13). It was impossible to do so here. Secondly (esto), even if the defender had proved the existence of a promise, at its highest it was no more than an unenforceable promise to reach an agreement. The commercial judge had erred in holding that any obligation arising was collateral. He had, in his Note, explained that he had held that the obligation was bilateral, yet he had not treated it consistently in that manner in his Opinion. If it were bilateral, the commercial judge had only had regard to the obligations on the pursuers. If it were collateral, the agreement to which it related was not identified (Ground 1).
 The commercial judge had erred in his factual and legal conclusions. There were three primary points: (1) the words used in the telephone conversation of 14 June, looked at objectively, were not capable of supporting an inference that the parties had intended to enter into a contract for the provision of building funding of £700,000; (2) Ms Hutchison's evidence did not support the defender's position. The commercial judge had: (a) misconstrued her evidence; and (b) failed to take into account what had happened in the week after the call, which was only consistent with there being no collateral warranty or other obligation at that time regarding building funding; and (3) the evidence, which the commercial judge had accepted, clearly showed that the parties were in the habit of reducing their agreements to writing. That was consistent with the parties' intention being not to enter into binding legal relationships until that point had been reached.
 The conclusion reached by the commercial judge was so inherently unlikely that it had to be wrong. It was commercially absurd to suggest that the pursuers had, in the use of three words in a conversation over the telephone, contracted in a manner obliging them to lend the defender £700,000 (and further monies to his company) no matter what his (or its) financial position might be at the date of draw down. What had been said did not come close to satisfying the requirements for a contract of loan, hence the attempt by the defender to articulate the obligation as something different; namely a collateral warranty.
 The commercial judge reasoned that Ms Hutchison's version of the telephone call, that only purchase funding had been approved, made little sense. However, in the context of there being doubt about whether there was to be approval for either one or two houses, this was not so. The proposition, that unless the conversation was intended to refer to building funding it would only have been repeating what had already been said, was a weak one standing that the defender himself had said that the approval had been repeated on 21 June. Repetition was not inherently unlikely. In reaching his conclusions on what Ms Hutchison had said, the commercial judge had founded on what she had not said; notably her failure to make it clear that further funding was not guaranteed. Such a failure could hardly create such a guarantee.
 Ms Hutchison's evidence did not support the defender's position. She had not accepted that she had said that "all" had been agreed or that this had been conveyed to the defender. She had said that there were certain matters upon which the defender had to deliver before funding would be made available. She had said that he knew what he had to do by way of reducing his indebtedness and that any terms and conditions would have to be worked out. Her evidence was not consistent with the existence of a collateral warranty coming into being on 14 June. All that she was saying was that the pursuers had, at that time, an intention or appetite to provide funding. The commercial judge's finding (para ) that Ms Hutchison ought to have made any reservations about the pursuers' commitment clear could not stand alongside her evidence, which the commercial judge accepted, about what was happening at the time. For the same reason, the commercial judge's findings on what the defender "was fully entitled to believe" could also not stand.
 The informed bystander listening to the telephone conversation of 14 June would have expected the defender to ask if he was being given a guarantee or warranty or assurance that building funding was to be made available. He would have noticed that the defender had a solicitor and that, if an assurance were so pivotal, his solicitor could have taken that matter up with the pursuers. No informed bystander would think that a person putting down the phone on 14 June would think "I've got my warranty". There was a substantial time lag between then and the prospective lending date and all sorts of circumstances could have arisen meantime. No informed observer would expect a bank to enter into a loan agreement with no terms and conditions.
 On the commercial judge's approach, any eventual building funding agreements would not have included the General Terms, which would already have been included in the purchase funding agreements. The parties were in the habit of reducing their agreements to writing and it was not suggested by the defender that there was any obligation to provide purchase funding prior to the signing of the agreements. If the defender's position were that binding relations were created on 14 June, why should that only have been in relation to building funding? If there was no binding agreement to make purchase funding available after the phone call of 14 June, there could hardly be an obligation to provide building funding. The commercial judge's finding to the effect that the defender was entitled to consider that the pursuers had satisfied themselves about the defender's finances by 14 June could not stand with the conditions attached to the Indicative Terms signed thereafter.
 The parties' business dealings took the form of three stages. The first involved oral exchanges whereby they agreed to work with each other. The second was the production of Indicative Terms which set out heads of agreement with other matters to be worked out. This was essentially an exclusivity agreement or an agreement to agree if certain conditions were fulfilled. The third was the written loan agreement. It was only at the third stage that the parties entered into binding legal obligations in relation to the provision of funding.
 The over-arching question in relation to collateral agreements or promises was no different from that arising in relation to the formation of contract generally. Whether a binding contract existed, and what its terms were, depended not upon the subjective states of the parties' minds, but upon a consideration of whether what was actually communicated between them by words or conduct led objectively to a conclusion that they intended to create legal relations and had agreed upon all the terms which the law required as essential (RTS Flexible Systems v Molkerei Alois Müller  1 WLR 753, Lord Clarke of Stone-cum-Ebony, delivering the Opinion of the Court, at para ). In relation to a collateral agreement, a statement could only amount to such if was intended to have contractual effect as collateral and not as a term of the main contract (Treitel: Contracts (12th ed) para 9-49).
 The five criteria identified by Lightman J in Inntrepreneur Pub Co (GL) v East Crown (supra at para 10) were a useful guide. A pre-contractual statement had contractual effect only if that was what was intended by the parties. The test was the ordinary objective one for the formation of contract. One important factor was whether the statement was followed by further negotiations and a written contract not incorporating its terms. Another was the lapse of time between statement and formal contract. There were other considerations of importance, including: the difficulty in differentiating statements of intention or expectation from promises. There required to be an explanation "why the parties made a separate collateral contract at the time they were making another contract" (Hanoman v Southwark LBC (No 2)  1 WLR 374, Arden LJ at para 48). The test was what the reasonable observer would infer rather than what the parties subjectively intended (Inntrepreneur (supra), Lightman J at para 10). There was no binding obligation until all material terms of the contract were agreed. "An agreement to agree in the future is not a contract; nor is there a contract if a material term is neither settled nor implied by law and the document contains no machinery for ascertaining it" (Foley v Classique Coaches  2 KB 1, Maugham LJ at 13).
 The "inherent improbability of a separate 'stand-alone' obligation is a factor adverse to construction of a statement as a promise, in the absence of clear words which objectively indicate an intention to be bound" (McBryde: (supra) para 2-04). Such obligations are "unusual obligations which one would expect to see spelled out with clarity" (Krupp Uhde v Weir Westgarth, unreported, 31 May 2002, Lord Eassie at para ; Ballast v Laurieston Properties  CSOH 16, Lady Paton at para  under reference to Lord Advocate v City of Glasgow DC 1990 SLT 721; WS Karoulias v Drambuie Liqueur Co 2005 SLT 813, Lord Clarke at paras  and  referring to submissions at para  relying on Gordon's Exs v Gordon (1918) 1 SLT 407).
 The defender was saying that he had entered into an agreement with the pursuers for all the funding as at 14 June. That cannot be the case given what happened thereafter. There was a presumption that, if an agreement was to end up in writing, no obligations arose until that was done (McBryde (supra) para 5-44; WS Karoulias v Drambuie Liqueur Co (supra)). That was the position here and it presented a formidable obstacle to the defender's approach. Not only was there an expectation that any agreement would be reduced to writing but the parties had embarked upon that process. Cases such as Dick Bentley Productions v Harold Smith (Motors) (supra) concerned warranties in sale of goods and were not in point (see also McBryde (supra) at para 5-52 on the differences between English and Scots law).
 If the commercial judge were correct in relation to the existence of a collateral warranty, he had nevertheless erred in refusing to allow the pursuers' Minute of Amendment to be received. The next stage of the inquiry ought to have been in relation to the terms of the building funding and whether the defender would have been capable of fulfilling those terms.
 The defender moved the court to adhere to the commercial judge's interlocutor but, if it did not, to put the cause out By-Order to consider the precise quantum of any outstanding loan. The defender did not propose to refer to the content of his written Note of Argument but to develop alternatively phrased oral submissions. First, the commercial judge had been entitled to hold that the objective meaning of the words employed by Ms Hutchison on 14 June amounted to a "binding obligation" by the pursuers to provide development funding of up to £700,000. Secondly, because the meaning fell to be determined objectively, it was generally immaterial to consider what happened after that date. Thirdly, for the same reason, it was immaterial to consider what the pursuers subjectively intended to convey by the use of these words. What Ms Hutchison thought was neither here nor there. Fourthly, nothing of any significance turned on the use of the expression "collateral warranty". It was simply a convenient way of identifying an obligation entered into in connection with, or against the background of, another transaction.
 If the court held that the defender was entitled to understand the words as conveying a particular meaning, applying the objective test, that was sufficient to create an obligation. Put another way, if what the defender understood was what the informed bystander would have understood, then the obligation was made out. It was plainly wrong to say that the words used were not capable of bearing the meaning attributed to them by the defender. The words "it's all approved" were strictly meaningless unless the "it" could be identified. That was what the proof had been about. The meaning had to be understood either in the narrow context of the Gleneagles transaction or the broader context of the parties' prior dealings elsewhere. The latter included the stages at which the pursuers, having considered the defender's financial position, would approve the project. Ms Hutchison would provide oral confirmation to the defender that the pursuers would advance "the funds" and the "loan documents would not be signed off until the funds were actually needed".
 It was clear from the defender's references to paperwork that his perception was that the pursuers were committed prior to its execution and that it amounted solely to the implementation of the prior commitment given on the telephone. In that respect, "collateral warranty" was not a term of art. If the court found that the words used objectively meant that the bank had "contractually committed itself" then there existed a contractual obligation which had been breached. It was the substance that mattered and not the label. The commitment was solely on the pursuers to lend the money. Any obligations on the defender only arose upon draw down. The pursuers' obligation, as at 14 June, was to permit a draw down of some £2.5M in respect of the plot be developed by the defender personally. There was no obligation to provide security and the terms of the loan, such as the rate of interest, would be worked out at draw down.
 There was, as the commercial judge had said, no magic in a collateral warranty. A collateral undertaking given prior to a contract, which made no mention of it, could be enforced (British Workman's and General Assurance Co v Wilkinson (1900) 8 SLT 67). There was no 'entire agreement' clause in the written agreements as there had been in Inntrepreneur Pub Co (GL) v East Crown (supra) (see also Hanoman v Southwark LBC (No 2) (supra) and Dick Bentley Productions v Harold Smith (Motors) (supra)). Once the obligation was identified as collateral, certain consequences would flow, which could not flow from the principal obligation. What mattered was not the label, but the identification of the "obligation". The defender could amend if necessary.
 What had started off as a purely unilateral obligation to make a loan, which the beneficiary may or may not take up, would become a bilateral obligation, in which security would be provided as a cushion. It was not necessary for all elements to be covered for agreement to have been reached (RTS Flexible Systems v Molkerei Alois Müller (supra), Lord Clarke at paras 45 - 48). If something central to the obligation had not been covered, it was accepted that it would be more difficult to hold that a unilateral contract (sic) had been entered into. There was no need for an agreement about either interest or security (Neilson v Stewart 1991 SC (HL) 22). In relation to the amount of the loan, it was sufficient that there was a maximum specified.
 In relation to the pursuers' Minute of Amendment, it had come too late and was correctly not received.
 It is of the essence of the law of voluntary obligations that a party who seeks to enforce, what he maintains is, an obligation upon another is able to identify both the source and nature of that obligation. He must be able to point to words and deeds on the part of the other party which are said to have created the obligation and to specify the extent of the obligation thus arising. It will not do for a party to say simply that an obligation has somehow been created, if he cannot demonstrate where it came from and what it obliges the other party to do. Where, after a contested proof, the court considers that an obligation has been breached, it is equally important that the court specify the source and nature of that obligation. If the obligation arises from contract, it will normally be necessary also for the party and the court to identify the essential terms of that contract.
 A voluntary obligation can arise, and generally only arise, in two different ways (see eg Black: "Obligations"; Stair Memorial Encyclopaedia vol 15, para 611). It can be created by a contract between two parties; in which case there are usually, but not always, obligations on both parties. It can also be created by one party making a promise to the other; in which case the obligation will be a unilateral one, albeit that it may be the subject of conditions which must be purified by the other party. The creation of a voluntary obligation falls to be distinguished from the existence of a representation made by a party in advance of contracting which may not form part of a later contract, but which may have induced the party to enter into that contract.
 It may be, as the commercial judge put it, that there is no "magic" in a "collateral warranty". However, when two such words are used in legal pleading, they each have a well known meaning. First, a warranty in Scots Law is a term of a contract (see McBryde: Contract (3rd ed) para 20-93; and notably Smith: Short Commentary at 766). It is not something which exists as a free standing legal entity outwith a contract. It is not the same as an "assurance", which may or may not be a term of a contract. Secondly, if something is to be regarded as "collateral", it must be linked to a principal item. If something is described as a collateral warranty, it must be taken to relate to a term of an existing contract which is collateral to another, different, contract (cf a collateral undertaking in British Workman's and General Assurance Co v Wilkinson (1900) 8 SLT 67).
 A representation may amount to a warranty, in the sense of being a term of a contract, when, at or about the time of contracting, what is said relates to the subject matter of the contract. Thus, classically, in a contract of sale, where the representation concerns the conformity of the item for sale with a given description, that conformity will be taken to be a term of the contract, if that is what can be deduced as being what the parties intended (Hyslop v Shirlaw (1905) 7 F 875, Lord Kyllachy at 881; McInally v Esso Petroleum Co 1965 SLT (notes) 13; cf the approach in England in Dick Bentley Productions v Harold Smith (Motors)  1 WLR 623 and Inntrepreneur Pub Co (GL) v East Crown  2 Lloyd's Rep 611, which will often achieve a similar practical result). That exercise in deduction is an objective one. As the Lord President (Dunedin) said in Muirhead & Turnbull v Dickson (1905) 7 F 686 (at 694): "commercial contracts cannot be arranged by what people think in their inmost minds. Commercial contracts are made according to what people say".
 For an obligation to arise, the words (and deeds) must objectively convey that a party is thereby committing himself to be legally bound to do something. In the case of a contract, there must be agreement on all the essentials of the particular contract; a sound test for whether that has occurred being whether the obligation said to have arisen can be enforced in practical terms (McArthur v Lawson (1877) 4 R 1134, LP (Inglis) at 1135-6). Equally, if it is said that a party has promised to enter into a contract (eg of loan), the essentials of that contract must be readily capable of ascertainment. An agreement or a promise to enter into a contract, where the essentials are not ascertainable, cannot be regarded as legally binding. It is always a matter of fact whether a particular feature is an essential element and the court will be anxious to give validity to agreements or promises in the commercial sector (R & J Dempster v Motherwell Bridge and Engineering Co 1964 SC 301, LP (Clyde) at 328, Lord Guthrie at 332). There will be situations where essential elements will be capable of agreement or ascertainment after a concluded bargain or an unconditional promise has been made, especially where there has been a course of prior dealing.
 As indicated above, the obligation arising may involve a unilateral obligation created by promise or a unilateral or mutual one created by contract. However, if the import of the circumstances is that the party or parties did not intend to be bound until the obligation was enshrined in a formal, or at least written, contract, then no legal obligation will arise until that is done (McBryde (supra) at para 5-41 under reference to Stobo v Morrisons (Gowns) 1949 SC 184, LP (Cooper) at 192 and Van Laun & Co v Neilson Reid & Co (1904) 6 F 644, LP (Kinross) at 650 and see eg WS Karoulias v Drambuie Liqueur Co 2005 SLT 813. Furthermore, if, after a course of dealing, the parties do reduce their bargain to writing, it will normally be presumed that the writing contains the terms of that bargain (Contract (Scotland) Act 1997, s 1). It will be difficult to argue that the terms are different by reason of an earlier statement by one of the parties in relation to a matter specifically provided for, and hence expressly agreed upon, in the writing (Norval v Abbey 1939 SC 724, cf an additional term or clarification in McInally v Esso Petroleum Co (supra); see also Hanoman v Southwark LBC (No. 2)  1 WLR 374, Arden LJ at para 48). The defender's position founders both in relation to the words and deeds said to have created an obligation and, in any event, upon when such an obligation was to become legally binding.
 The defender maintains that an obligation on the pursuers arose on (or before) 14 June 2007, during the course of a telephone conversation when, after a course of dealings between the parties, the pursuers' employee stated "It's all approved. Edinburgh are going for it for both houses". The defender's position is that this created a "collateral warranty" to the effect that the pursuers would provide funding for his (and his company's) development at Gleneagles, including finance for the building of a house(s) on the plot(s). The commercial judge has sustained the defender's plea to the effect that the pursuers have breached this "collateral warranty", albeit that he seems unable to characterise the obligation as arising from contract or promise. He has pronounced a declarator that, in effect, the pursuers are in breach of an obligation to provide development funding of £700,000 by way of a "loan", albeit that none of the terms of that prospective loan, other than its amount, are specified and where that amount is expressly contradicted by the subsequent written agreements.
 The court disagrees with the commercial judge's conclusion. On a proper analysis of the parties' dealings, and in particular what was said in the telephone conversation, at most all that the pursuers' employee was doing was advising the defender of an internal decision of the pursuers, which amounted to approval in principle of the proposal to lend the defender (and his company) funding for the development(s). She was not, in so communicating to the defender, creating a legal obligation on the pursuers to lend to the defender (and his company) several million pounds. In this regard, applying the test of the objective observer, such an observer, if informed of the background of dealings between the parties and the defender's knowledge of how the pursuers, like most other banks, operate, would not have regarded what was said as creating such an obligation. Standing the parties' prior dealings and what had happened prior to the telephone conversation, such an obligation could arise only in the event of the parties entering into a written contract to that effect. That is what had happened in the past between the parties. It is what was clear from what was happening in the lead up to the telephone conversation. It is evident from what actually happened after the telephone conversation and, in particular, the production of the Indicative Terms, which the defender signed and which identified in clear written form, the state of the parties' negotiations as acknowledged by the defender's signature at the time. It is clear from the written agreements which the defender in fact entered into.
 The defender, and to a degree the commercial judge, seek to dismiss the Indicative Terms and the written agreements as mere "paperwork"; as if they amounted to no more than the written expression of what the parties had already orally agreed. However, since whatever had been said in the telephone conversation made no reference to any of the necessary elements which required to be agreed before any draw down (loan) would be permitted, it is clear that this is not what the writings were intended to be. Rather, in accordance with what the informed observer would expect, it is these documents, and effectively these documents alone, which create, define and express the mutual obligations of the parties in relation to the provision of banking facilities. Without specification of the essential elements of that provision (including the maximum draw down, interest rates, time of drawn down, method and time of repayment and securities), there could be no concluded agreement capable of enforcement. In this context, it is of some significance to note that the defender is a businessman, acting with advice from both an accountant and a solicitor. He has had a course of dealing with the pursuers and he is aware that, whatever oral discussions there may be between himself and the pursuers' local staff, no draw down of funds (ie actual lending) would be permitted unless and until a written contract was entered into between the parties which set out, in detail, the parties' obligations in relation to the funds to be drawn down.
 One thing is clear, this is not a case of "collateral warranty". If the defender were correct to say that the pursuers had "assured" him that full funding for the whole development would be made available, such an assurance could conceivably, in certain circumstances (notably specification of all essential terms), amount to a promise on the pursuers' part in relation to the provision of that entire funding. That is not, of course, the defender's case on record. But even if it were, it can be seen that such an assurance could not be "collateral" to any other bargain. No other bargain then existed. It cannot be regarded as "collateral" to the later agreements, which themselves defined different levels of funding and different purposes for that funding. If it existed at all, it would effectively be an entire obligation in itself stipulating, in particular, the level of funding to be provided. However, it would then be an obligation which would, in due course, be in direct conflict with that to which it is said to be collateral (ie the written agreements). This in itself would be a sufficient basis upon which to reject the defender's counterclaim, since it is not based upon the existence of such an entire or overarching obligation, of which the written agreements constituted only part implement. The defender has not proved his case upon record concerning the existence of a "collateral warranty" as those terms might be properly understood (see supra). Nevertheless, the court would be reluctant to decide the case purely on that basis. Rather, it will set out its view on the import of the telephone conversation as the vehicle for the creation of an obligation.
 It is no doubt true that the defender had told the pursuers that he required funding for the whole project to be successful and that he would lose money, were his development not to proceed to a conclusion. The commercial judge has found that to be the position and this court has no cause to interfere with his findings of primary fact. He has also found that, in the telephone conversation, Ms Hutchison had said the words which the defender attributed to her. The court proceeds upon the basis that this finding (that "it's all approved") is sound. It is the import of these words that must be considered. Again, despite the arguments to the contrary by the pursuers, the court will proceed on the basis that what was meant was that approval had been given by "Edinburgh" for the whole development and not just the purchase funding, even if this does seem to this court to be somewhat improbable. However, quite apart from the generality that major banks do not normally lend private individuals (or companies) millions of pounds (in this case some £3.745M) without setting out the terms and conditions of such a facility in writing, the defender himself knew that, whatever had been said in oral discussions, the parties' obligations would have to be formulated in writing. The defender would have to sign a formal written agreement before he was given access to any funding (see supra under reference to Transcript at II, 181). Until that was done, the matter was, as the defender himself put it, a matter of "trust".
 In such circumstances, looked at objectively, all that took place on the telephone was that Ms Hutchison had told the defender of what was effectively approval of funding for the development in principle in accordance with the pursuers' internal procedures. Such a communication could not of itself create a binding legal obligation with the other party and would not be seen by the informed observer to do so. It amounted only to a statement of future intention. Legally binding obligations would, and could, only occur once the appropriate official of the pursuers signed the appropriate offer letter and this was accepted by the defender. Legal obligations thus would only arise by means of a written mutual contract. They would not be created by an expression that the pursuers intended to proceed with the funding (ie by unilateral obligation created by oral promise). They would be created by that later stage (ie by mutual written contract).
 The first stage in the progress towards the creation of binding legal relations occurred a week after the telephone conversation and was the production of the Indicative Terms. Whatever might have been said before then, the defender signed those terms as representing the state of relations then pertaining between the parties. It will not do to dismiss these Terms as "paperwork" which would not raise "alarm bells". Whether alarm bells ought to have rung is entirely irrelevant as is what the defender thought might happen thereafter. The reality is that the parties signed "Indicative Heads of Terms". They may have been inaccurate in their exclusive reference to Carlyco, but what is important is that they refer only to purchase funding and to such funding being made available in terms of a "Facility Letter" to be produced by the pursuers. It states that "representations and warranties" would be the "usual" ones. It would presumably not be usual for a Facility Letter to warrant funding beyond that which was actually offered. The binding element of this document is simply, as it says, that the pursuers have made a "formal offer of facilities" to the extent of the purchase funding only and that a period of "exclusivity" would follow, during which the defender would produce the required documentation to enable the pursuers to "conclude diligence and proceed to draw down". As at 21 June, therefore, both parties having signed the Indicative Terms, the informed observer would understand that, whatever had occurred before, the parties' legal relationship was henceforth defined by those Terms. There is no other possible objective interpretation of the factual circumstances.
 It is an interesting feature of the defender's position that he maintains that it was as a result of the pursuers' collateral warranty that he entered into the written agreement(s). However, it was not the entering into these agreements that caused him any loss. After all, these agreements did not oblige him to do anything unless and until he wished to draw down funds. It was entering into missives with the sellers binding himself to purchase the plot on the strength of what he had been told by Ms Hutchison that may have resulted in such losses as he avers. Be that as it may, the fact that he entered into the written agreements, in the terms which he did, provides further confirmation that it was those agreements, and only those agreements, that thereafter defined the mutual obligations between the parties in relation to borrowing facilities and set the limit of those facilities, in relation to the defender's own plot, at £1.405M. The agreements, which were presumably similar to those which the parties had used previously, take the form of an offer (and acceptance) of borrowing facilities on detailed terms and conditions. The agreements make it clear that no obligations would arise unless and until the defender had signed and returned the acceptance part of the offer, which had already been signed by the pursuers. The agreements make it equally clear that the facility for draw down was subject to the written terms of the offer and acceptance and not any earlier assurance. Again, no matter what had been said in the past, the signing of those agreements meant that each party acknowledged these as defining the state of their legal relations. If the defender considered that they did not properly reflect what he understood was to be agreed, or had been agreed orally, then he ought not to have signed the agreements. At all events, whatever the defender thought was the position, the informed observer would understand the written agreements to cover all matters agreed to date. It may well be that, at that time, the pursuers fully intended to enter into a further bargain with the defender to advance additional funding for the building works. However, they had not done so and did not do so. That may have been contrary to the spirit of the negotiations prior to the signing of the written agreements, but that spirit, or its moral content, cannot be taken as creating a legally binding voluntary obligation.
 In these circumstances, the court will: allow the reclaiming motion; recall the interlocutor of the commercial judge dated 10 May 2010; repel the defender's first plea-in-law to the counterclaim; sustain the pursuers' second plea-in-law in the counterclaim and assoilzie the pursuers from the conclusions of the counterclaim; repel the defender's first to fourth pleas-in-law to the principal action; and sustain the pursuers' first plea-in-law to that action. On the motions of both parties, it will put the case out By-Order to determine the precise terms of the decree to follow in respect of the conclusion of the summons.
 For the sake of completeness, had the court reached a different view, it would have recalled the interlocutor of 10 May 2010 to the extent that it refused to allow the pursuers to amend their averments on quantum of damage. As already indicated, the court struggled to grasp why the evidence at the proof did not cover that aspect of the case. However, having determined that quantum would be dealt with at a subsequent proof, the diet of which had not yet been fixed, the court is unable to understand the basis upon which it could be said that the proposed amendment came too late, given the comparatively early stage of the procedure on that aspect.