However, our intention, and we understand, your intention to go immediately in good faith in negotiating such a binding final agreement . . . . [Added highlight] Earlier this year, the Court of Appeal issued its judgment in the long-standing saga of Petromec/Petroleo ( 1 Lloyds Report 121) (the company successfully represented Petroleo in the litigation) and considered whether or not an explicit undertaking in an agreement between the parties to bargain in good faith was enforceable. The agreement is as follows: – On appeal, the Court of Appeal accepted the High Court and found that “for an additional period of time, there must first be another agreement between the parties” since this was agreed within the OSG. Accordingly, both parties were free to agree or argue over the duration of an extension, if any, without the duty to negotiate in good faith or to disable their own business interests (provided that the underlying contract did not indicate the opposite of what it did not).3 The term was “very paradigm” of an unenforceable agreement to accept. The case shows that it is unlikely that a negotiation agreement that is not within an existing contractual framework will be enforceable if the negotiations are not successfully concluded. When such an obligation is proposed, it is appropriate to carefully consider whether “good faith” or “reasonable efforts” should be made, since a court might give other importance to these provisions.
In this article, which follows our earlier update of the case, we examine the effects of the recent Court of Appeal case of Morris/Swanton Care – Community Ltd (Morris),2 in which the applicant sought to avail himself of a contractual option to provide additional services for “such a long period, which reasonably must be agreed upon,” as the basis for an action for damages. Finally, a number of wording points can be drawn from the judicial treatment of the agreements to be agreed upon. Morris is a useful reminder that when it comes to agreements, the courts distinguish between: there is no concept of “one size fits all” that can be invoked, since the courts will make their decision on enforceable force on the basis of their interpretation of the agreement as a whole. However, if a clause gives the parties the opportunity to accept or object at a later date, whether reasonable or not, the parties should consider that the courts will apply such a clause only slowly. According to Justice Teare`s decision, parties to contracts subject to the laws of England and Wales or to laws strongly influenced by the laws of England and Wales should ensure that any multi-stage dispute settlement clause is clear and that it is possible to objectively assess whether a party has met conditions that are in the process of formal proceedings.