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Case 6 - An express lock-out agreement

Published online by Cambridge University Press:  10 August 2009

John Cartwright
Affiliation:
University of Oxford
Martijn Hesselink
Affiliation:
Universiteit van Amsterdam
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Summary

Case 6

A and B are negotiating for the sale by A to B of A's business. At the start of the negotiations, A agrees that ‘for a period of three months he will not negotiate with any third party nor consider any proposal from a third party with a view to concluding a contract for the sale of the business’. During the negotiations between A and B the price is agreed (as €2m) although there is no contract concluded because of other outstanding matters, including the question of whether B will continue to employ the whole of A's workforce. After two months, A receives a proposal for the sale of the business from C, who agrees to take on the whole workforce and to pay a higher price (€3m). A then breaks off the negotiations with B and, after conducting negotiations with C, concludes a contract with C for the sale of the business. During the negotiations, B had incurred accountants' and lawyers' fees in investigating the state of the business. The real value of the business, as established by independent experts, is €3m. What liability (in contract, tort, restitution, or any other form of liability), if any, does A have to B? Would it make a difference if A had instead agreed that ‘he will negotiate with B in good faith and only break off the negotiations for a proper reason’?

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Publisher: Cambridge University Press
Print publication year: 2009

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