Over Taylor Biggs

The Court in the recent case of Petromec v. Petrobras [2006] 1 Lloyds 121 in [2009] NLJ 1511, 1547 had to look at an agreement to negotiate in the context of a fairly complicated Oil Production Platform Purchase Agreement.  The Agreement, which had been negotiated between the parties and their lawyers, contained a clause in the Agreement that required two of the parties to negotiate in good faith over one of the items.  The Court under the circumstances had little difficulty distinguishing it from the existing case law, which primarily dealt with pure bare agreements to negotiate without any form of time limit or the like or any obligation to use good faith in the negotiations.  The clause in the Petromec case was not a bare agreement to negotiate.  It was an express obligation in a complex contract to negotiate in good faith within a set period of time.  The Court found that the clause to negotiate in good faith was as such enforceable.

Conclusion

The conclusion is that an agreement to negotiate can be binding, provided it is sufficiently well defined, there is an express commitment to use "good faith" and there is a defined period in which to conduct such negotiations.

This briefing note is not intended to be a comprehensive guide and does not cover every aspect of the topic and is not intended to provide legal or other advice.