Contract

A contract is any legally-enforceable promise or set of promises made between parties. In the civil law, contracts are considered to be part of the general law of obligations. This article describes the law relating to contracts in common law jurisdictions.

Agreements to negotiate

It is common for lengthy negotiations to be written into a heads of agreement document that includes a clause to the effect that the rest of the agreement is to be negotiated. Although these cases may appear to fall into the category of agreement to agree, courts nowadays (at least in Australia) will imply an obligation to negotiate in good faith provided that certain conditions are satisfied (Coal Cliff Collieries Pty Ltd v. Sijehama Pty Ltd (1991) 24 NSWLR 1):

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• Negotiations were well-advanced and the large proportion of terms have been worked out; and
• There exists some mechanism to resolve disputes if the negotiations broke down.

The test of whether one has acted in good faith is a subjective one; the cases suggest honesty, and possibly also reasonably.

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