The parties to the Delgardo case were involved in legal litigation. In an attempt to resolve the dispute, they agreed to buy and sell a business for $75,000, with $3,000 less and $1,000 in subsequent monthly payments. You have not agreed to any other purchase terms, but you have agreed in writing to cooperate in good faith to accept these terms in the future. The future came, and when the parties discussed and negotiated these additional terms, they could not reach an agreement. One party argued that there had been an agreement to buy and sell the business; The other said no agreement had been reached. The Commercial Court accepted the plaintiff`s argument that the parties intended to enter into a binding contract and should therefore endeavour to implement the option contract. It pointed out, inter alia, that the option agreement formed part of a `set` of contracts and that the consideration for the grant of the options by the defendant included the applicant`s subsidiaries which concluded the shipbuilding contracts. Morris affirmed the principle that general standards that prescribe how the parties should attempt to agree on conditions, such as the use of “best efforts” or “reasonable efforts,” render an agreement unenforceable.12 This is an important statement about the court`s current direction in this regard and a timely reminder of that, that each case will be linked to its particular circumstances. in particular, in view of the fact that the Court had already held that an express obligation in a contract to make every reasonable effort to enter into an agreement with a third party is enforceable.13 At first instance, the High Court held that the plaintiff had an enforceable right to provide advisory services during the first four-year period, but did not have such a right for an additional period. The parties` obligation to agree on the length of an additional period was unenforceable because it was an agreement that did not contain a “mechanism” or “objective standard” that allowed the court to draw “a conclusion” about the duration of the extension. By letter of 2 October 2013, the applicant made use of the first option.
In the end, however, no delivery date was agreed and the parties did not enter into shipbuilding contracts for the four tankers under the option. In this article, following our previous update of the case, we examine the impact of the recent court case Morris v Swanton Care & Community Ltd (Morris)2, in which the plaintiff attempted to invoke a contractual option that allows him to provide additional services for “the additional period that must reasonably be agreed” as the basis for a claim for damages. Finally, we highlight a number of editorial points that may arise from the judicial treatment of the agreements to be agreed. The plaintiff, an oil tanker operator, entered into an option agreement with the defendant, a shipbuilder. The agreement offered the applicant three options, each relating to an order for four oil tankers. It provided that when an option is exercised, delivery dates will be “mutually agreed” between the parties, but the defendant “will do its best to obtain delivery” in 2016 for tankers in option one and in 2017 for tankers in options two and three. It also provided that the parties would enter into shipbuilding contracts within 10 days of exercising an option. The parties and their subsidiaries have also entered into other agreements, including four shipbuilding contracts, each for an order for an oil tanker.
The plaintiff brought an action, arguing that he was entitled to an “additional period to pay” under the SPA The plaintiff pointed out that the wording used in the SPA (i.e. “should have the option”) was mandatory. The defendant argued that it was not obliged to grant an extension to the plaintiff because the provision was an unenforceable agreement. The defendant also argued that, although it was not obliged to act appropriately in responding to the extension proposed by the applicant, it had in any event acted reasonably when it rejected it. Contracting parties are often under pressure to reach an agreement quickly and can therefore resort to postponing certain conditions to a later date in order to “conclude the agreement”.
