Walford v Miles
House of Lords
Citations: [1992] 2 AC 128; [1992] 2 WLR 174; [1992] 1 All ER 453; (1992) 64 P & CR 166; [1992] 1 EGLR 207; [1992] 11 EG 115; [1992] NPC 4.
Facts
The defendants were a couple who ran photo processing company out of a property they owned. They began negotiations with the claimant to sell both the business and the property. The defendants agreed that they would exclusively negotiate with the claimant (a ‘lock out’ agreement) if the first claimant sent them a ‘comfort letter’ from their bank. The claimant secured the comfort letter the next day. While the defendants initially cut off negotiations with third-parties, they ultimately decided not to sell to the claimant. They then sold property and business to a third party.
The claimant sued for breach of the lock out agreement. The defendants responded that there was no binding agreement. This was because the lock out agreement was too uncertain to be enforced: it did not state how long the defendant was prohibited from negotiating with others. The claimant responded that the lock out agreement contained an implied term requiring the defendants to negotiate in good faith with the claimant for as long as they wanted to sell the business/property. This rendered it sufficiently certain.
Issue(s)
- Did the lock out agreement contain an implied term requiring the defendant to negotiate with the claimant?
- Was the lock out agreement unenforceable for uncertainty?
Decision
The House of Lords held in favour of the defendants. The lock out agreement was too uncertain, because it did not specify how long it lasted or provide the defendant with any power to terminate the negotiations. The claimant’s suggested implied term was unworkable and inconsistent with the party’s adversarial position.
This Case is Authority For…
An agreement to negotiate, an agreement to agree, and an agreement to negotiate in good faith is insufficiently certain to be enforceable in English law.
Additionally, such terms are inconsistent with the adversarial position of people negotiating contracts. Negotiating parties expect to be able to pursue their own interests and walk away from negotiations at any time. As such, it makes no sense to imply an agreement to agree or negotiate in good faith either.
Other
Lord Ackner suggested that an agreement to ‘use best endeavours’ to achieve some goal would be sufficiently certain to be enforced.
