Brief Fact Summary. Plaintiff entered into an agreement for the purchase of an ice cream plant, which Defendant owned. As a part of the agreement, the parties also agreed to co-packing, an agreement by which Defendant would purchase Plaintiff’s products. Defendant formed a letter of intent to enter into the agreement, but left many terms undecided. Later, Defendant backed out of the co-packing agreement, and Plaintiff brought suit contending that a binding agreement had been formed.
Synopsis of Rule of Law. This case stands for the proposition that agreements, encompassing future negotiations, must be considered in light of all terms. If essential elements of the agreement are undecided, there is no binding obligation until they become decided.
An alleged breach of the implied covenant of good faith and fair dealing is an allegation of breach of contract and arises out of the contract itself.View Full Point of Law
Issue. This case considers whether a binding agreement arises when a promise is made, conditional on the fact that the essential elements will be decided at a later time.
The court found that because the essential elements of the agreement had not been decided and reserved for future decision, the agreement was incomplete and no legal obligation had taken effect.
The Court also notes that failure to agree is not a breach of an agreement to negotiate, if both parties have, in good faith, negotiated.
Discussion. Parties oftentimes enter into an agreement which encompasses future negotiations. The key concept to remember is, when future negotiations are foreseen, if they deal with an essential element of the agreement, the agreement is not complete, nor is it binding, until those terms are agree