Preliminary Negotiations or Binding Obligations? A Framework for Determining the Intent of the Parties

Neva B. Jeffries, Atlanta's John Marshall Law School

Abstract

This article addresses the challenges faced by courts in determining whether parties intended to be bound by informal preliminary oral or written agreements. It is a fundamental tenet of contract law that mere participation in negotiations does not result in a binding obligation. However, parties sometimes do intend to bind themselves to informal agreements at an early stage in negotiations. When the intent of the parties is not clear, disputes can arise and a judge or jury will be called upon after-the-fact to determine whether the contract is binding. Unfortunately, there are no bright-line rules for how to determine the parties’ intent to be bound. The complexity of this area of the law is compounded by the fact that the threshold question of who decides the issue – a judge or a jury – is often a murky one. The article begins by discussing the way that courts historically have analyzed disputes between parties over the intent to be bound by preliminary agreements, and addresses the various causes of action available to plaintiffs. Then, using a recent high-profile case out of the Georgia Court of Appeals – Turner Broadcasting System, Inc. v. McDavid – as a backdrop, the article explores some of the difficulties involved in interpreting parties’ intent on an ad hoc basis and the potential danger inherent in leaving such matters to a jury to decide. In the article, I propose an analytical framework with which to analyze parties’ intent, particularly in situations where there is a non-binding written preliminary agreement. In discussing the proposed analytical framework, I also address the question of who should decide the issue of intent – a judge or a jury. Finally, I present a number of sound policies that support adoption of the suggested framework.