Introduction

English law assumes that negotiations represent a genuinely adversarial process. The freedom from being bound by the final contract before the negotiations are finalized is a cornerstone of contract law. This ‘negative’ side of freedom of contract also implies that contract law imposes no general duties on the parties’ behaviour during the course of negotiations. No specific intermediary regime of contractual negotiations has been developed. The so-called ‘bare agreements to agree’ that is, promises about the manner of negotiating, are not enforceable, the domain of contract and non-contractual regulation being rather sharply divided.

Nevertheless, contractual negotiations are not a period of ‘no law’. As Lord Justice Bingham has famously stated, discussing contractual negotiations from a broader perspective of private law, ‘English law … has developed piecemeal solutions in response to demonstrated problems of unfairness’. In the same vein, Lord Justice Mummery has contended that English law addresses ‘particular problems of unacceptable conduct occurring in the course of negotiations without unduly hampering the ability of the parties to negotiate their own bargains without the intervention of the courts’. Andrews has compared the English law solutions applicable to negotiations to a ‘Swiss army knife’. The available tools include not only contract law doctrines ascertaining the enforceability of contractual promises, but also the law of restitution or unjust enrichment, the duty of confidence developed in equity, and torts of deceit and negligent misrepresentation; the doctrine of estoppel may play a role in this regulation as well.

This multifaceted framework of regulation provides several solutions applicable to the practice of issuing letter of intent. The solutions are more nuanced than it might appear at first sight, when one's attention is primarily drawn to the unenforceability of ‘bare agreements to negotiate’. English law has developed two exceptions to this unenforceability: temporary agreement on exclusive negotiations and undertakings to use best efforts to obtain an export licence or a planning permission. To be treated as exceptions, these should fulfil the criteria of certainty and consideration. These requirements are deeply rooted in the requirements as to the enforceability of a contractual promise. Furthermore, English courts have developed a detailed approach to various provisions whereby the parties may negate contractual intent. The approach to such clauses was developed using another doctrine relevant for contract formation – the assessment of intention to create legal relations.