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The Enforceability Of Agreements To Negotiate In Good Faith

[144] James R Silkenat, The ABA Guide to International Business Negotiations: A Comparison of Cross-Cultural Issues and Successful Approaches (American Bar Association, 2009) 208. See also Mason, above no. 108, 90, where Sir Anthony Mason suggested that Australia could be left “pale beyond good faith”. [125] For example, Jobern Pty Ltd v BreakFree Resorts (Victoria) Pty Ltd [2007] FCA 1066; [2008] Aust Contract Reports 90-269 [185], in which Gordon J. found, in judging whether conduct constituted a breach of a duty of good faith, that it was relevant for the parties to “negotiate in the context of the seller and the buyer.” The use of agreements to negotiate other terms in good faith reflects the commercial reality that contracts are often the result of several “rounds of negotiations”, agreement on certain points and renegotiations that result in a broader agreement. [53] If agreements in good faith prove to be unenforceable, the costs incurred by one party in conducting preliminary negotiations would be in vain if the other party rendered the negotiations capriciously and unilaterally before other rounds of negotiations. Negotiation agreements can therefore provide a degree of security and certainty that funds spent on preliminary transactions will not be wasted. Another reason why the parties wish to enter into an agreement in good faith is to ensure that negotiations do not take unnecessary time because of delaying tactics or a party`s refusal to participate. Negotiations are often influenced by dynamics and “the flow of negotiations can be slowed down and accelerated by the action of the parties”. [54] In this sense, a clause requiring negotiations in good faith, if applied, may constitute an “event that forces action”[55] that ensures that negotiations do not stagnate. In the past, good faith agreements have been found to be unenforceable by the English courts, in particular for reasons of uncertainty. Recent English case law has proposed to some to relax this approach. However, on closer inspection, it seems misleading.

As the case shows, it is unlikely that a negotiation agreement other than a negotiation agreement, which is part of an existing contractual framework, can be implemented if negotiations are not successfully concluded. Where such an obligation is proposed, careful consideration should be given to whether a duty to sue should be included “in good faith” or by “reasonable efforts”, given that a court might give different importance to such provisions. While it is strictly theoretically not necessary to define “faithfully and believe” to ensure applicability,[165] the representation of some of its characteristics can help courts overcome the uncertainty barrier. . . .