Potential buyers of a property were surprised when, shortly after the successful conclusion of lengthy negotiations between the parties, the sellers informed them that they were withdrawing from the transaction and subsequently sold the property to a third party, with whom they were negotiating at the same time. The sellers justified their conduct with a note that appeared at the top of the pages of the draft agreements that were exchanged.
The court rejected the potential buyers’ claims due to the parties’ agreement to the framework terms. In negotiating a contract, the parties must act in good faith. This requirement does not preclude the possibility of conducting additional negotiations in parallel, provided that the other party is informed. When the draft contract includes a provision according to which in the absence of a signature, the agreement will not be finalized, it is not possible to claim that the parties’ agreement was reached to create a contractual obligation, even if they agreed to all the relevant details necessary for the completion of a binding contract. Here, we are talking about framework terms that appeared in the title of each page in all the draft agreements exchanged between the parties, and included the parties’ agreement to conduct negotiations in parallel and a determination that agreement would be expressed only in the signing of a final and binding agreement. Therefore, and especially considering that these are experienced parties represented by lawyers, the sellers were entitled to conduct negotiations in parallel and withdraw from the negotiations with the potential buyers, despite the advanced stage in the negotiations that the parties had reached.
