Walford v Miles
An agreement to negotiate in good faith is too uncertain to be enforced, though a lock out agreement for a fixed period can be.
Facts
The Miles family owned a photographic processing business and were negotiating to sell it to the Walfords for £2 million. They orally agreed that, if the Walfords provided a comfort letter from their bank confirming that finance was available, the Miles family would terminate negotiations with any third party and would not consider any other offer. The Walfords provided the letter, but the Miles family then sold the business to a third party. The Walfords sued, arguing that the agreement included an implied term to continue negotiating with them in good faith.
Legal principle
The House of Lords held that the agreement was unenforceable. An agreement to negotiate, like an agreement to agree, is too uncertain to have binding force, because no court could say when the parties were obliged to stop negotiating or whether a proper reason existed for ending them. Lord Ackner said that a duty to negotiate in good faith is inherently repugnant to the adversarial position of the parties, each of whom is entitled to pursue their own interests. A lock out agreement, a promise not to negotiate with anyone else, can be enforceable, but only if it is for a definite period, and this agreement had no time limit.
Related cases on offer and acceptance
- Adams v Lindsell (1818) 1 B & Ald 681
- Blackpool and Fylde Aero Club Ltd v Blackpool Borough Council [1990] 1 WLR 1195
- Brinkibon Ltd v Stahag Stahl und Stahlwarenhandelsgesellschaft mbH [1983] 2 AC 34
- Butler Machine Tool Co Ltd v Ex-Cell-O Corp (England) Ltd [1979] 1 WLR 401
- Byrne & Co v Van Tienhoven & Co (1880) 5 CPD 344
- Carlill v Carbolic Smoke Ball Co [1893] 1 QB 256
- Dickinson v Dodds (1876) 2 Ch D 463
- Entores Ltd v Miles Far East Corp [1955] 2 QB 327
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