X

Thank you for sharing!

Your article was successfully shared with the contacts you provided.
Andrew Hutcheon and Mark LeeAndrew Hutcheon and Mark Lee ()

When parties are negotiating an agreement or exchanging term sheets that will form the basis for a more formalized agreement, there is no shortage of business and economic issues to consider, especially when the proposed transaction involves parties across the Atlantic. The parties, however, should be aware that there are subtle differences between the approaches of New York and English law as to whether the courts will step in to “complete” preliminary or incomplete agreements where material terms are left to be agreed. One such difference is whether a preliminary agreement creates a duty to negotiate any remaining open terms in good faith.

Under both New York and English law, where parties contemplate further negotiations of open terms and/or the execution of a formal written agreement, a preliminary agreement ordinarily does not create binding obligations.See Gas Natural v. Iberdrola, S.A., 33 F. Supp. 3d 373, 378 (S.D.N.Y. 2014); Barbudev v. Eurocom Cable Management Bulgaria Eood [2012] EWCA Civ. 548. In certain circumstances, however, both New York and English courts may enforce these agreements where doing so would be consistent with the parties’ intent.

When deciding whether a preliminary agreement is enforceable, both English and New York courts first ask the same basic question, which is whether the words used, and the background circumstances show, there is an intention to create binding legal relations. If so, courts will “strive” to give effect to that intention.See Point Developers v. F.D.I.C., 921 F. Supp. 1014, 1022 (E.D.N.Y. 1996); Interoil LNG Holdings v. Merrill Lynch PNG LNG, 60 A.D.3d 403, 404 (1st Dep’t 2009); Chadwick LJJ. in BJ Aviation v. Pool Aviation [2002] EWCA Civ. 163, paragraphs 20 and 23; Eder J. in MRI Trading AG v. Erdenet Mining Corporation [2012] EWHC 1988 (Comm), paragraph 27; Mamidoil-Jetoil Greek Petroleum Company SA v. Okta Crude Oil Refinery Ad [2001] EWCA Civ. 406, paragraph 69.

This content has been archived. It is available through our partners, LexisNexis® and Bloomberg Law.

To view this content, please continue to their sites.

Not a Lexis Advance® Subscriber?
Subscribe Now

Not a Bloomberg Law Subscriber?
Subscribe Now

Why am I seeing this?

LexisNexis® and Bloomberg Law are third party online distributors of the broad collection of current and archived versions of ALM's legal news publications. LexisNexis® and Bloomberg Law customers are able to access and use ALM's content, including content from the National Law Journal, The American Lawyer, Legaltech News, The New York Law Journal, and Corporate Counsel, as well as other sources of legal information.

For questions call 1-877-256-2472 or contact us at [email protected]

 
Reprints & Licensing
Mentioned in a Law.com story?

License our industry-leading legal content to extend your thought leadership and build your brand.

 

ALM Legal Publication Newsletters

Sign Up Today and Never Miss Another Story.

As part of your digital membership, you can sign up for an unlimited number of a wide range of complimentary newsletters. Visit your My Account page to make your selections. Get the timely legal news and critical analysis you cannot afford to miss. Tailored just for you. In your inbox. Every day.

Copyright © 2021 ALM Media Properties, LLC. All Rights Reserved.