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EULawyer, Lawyer
Category: European Law
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Experience:  Titular Attorney (Avocat) at Ioan-Luca Vlad Law Office
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Under English law (which was set out in the Letter of

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Under English law (which was set out in the Letter of Intent) an England registered company has been in negotiations with a Qatar registered and based company for a Qatar based project for almost two years. The English company quit negotiations very close to the shipping date, when the Qatar based company tried to change a basic payment term (they have backtracked on this when we stopped negotiations, but the decision is final to stop negotiations). A LOI at the beginning has been signed. But no contract has been signed between the parties at any time.Under English Law has the implied conduct (that the negotiations were going forward and almost resulted in signing a contract) resulted in anything legally binding between the parties? If yes, how can be determined what is binding?

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As your European Law expert, I am reviewing your question and will try to find a good answer for you.

Dear Customer,

Thank you for your previous rating. I will try to reply to your question as clearly as possible, bearing in mind that the area you inquire of now is not governed by written law but by unequally applied precedents.

First of all, there has been no legally binding result as an effect of implied conduct during negotiations, unless you signed throughout "intermediate agreements" (i.e. agreements to maintain the provisions which had been agreed to up to that point), which is very unusual.

The most that could be obtained in your situation would be damages. These damages would not be in lieu of the execution of the contract, but for violating an obligation of negotiating in good faith if such can be deemed to exist.

As a principle, this obligation does not exist under English law, but there are many exceptions. I will enumerate and explain those which may be applicable to your case:

1. Lock-out agreements, if the other party suffered damages as a result of being locked-out of negotiations with someone else;

2. Agreements to use "best endeavors" or to achieve fair price or cost. The "best endeavors" clause should be interpreted widely. In other words, a lot depends on the wording of the LOI. If there is some sort of deadline or negotiation timeline, a specific engagement to use particular negotiations methods or to employ third-party intervention in case the negotiations break down etc.

3. Framework agreements. If you negotiated within the framework of a larger agreement or commercial relationship, then it may be possible that the terms of that agreement have specific provisions for the undertaking of negotiations, imposing sanctions or other remedies.

There is no clear-cut answer, but even if the commercial partner would prove the existence of an obligation to negotiate in good faith, that obligation should first be executed in nature (i.e. a return to negotiations) and any damages resulting out of its non-performance would then have to be proven.

All in all, I would recommend showing the LOI to a commercial-law specialized attorney if you suspect some terms may provide for more than a general wish to negotiate.

Now, you should bear in mind something else as well (based on your previous question): the Qatari company can sue you in Qatari courts. They could have quite a different interpretation of English law than English courts, particularly in this case, where there is no specific written law, and it is in their interest to hold for their nationals. So even if an English lawyer gives one answer, you might have the surprise that they come up trying to enforce a ruling of a Qatari court, which goes against what an English court would have decided. This is one of the pitfalls of private international law (also known as conflict of laws). The most appropriate thing in this regard would be to fight both in the Qatari court, and afterwards in the English court which will judge the possibility of enforcement in England, but of course your strategy would also have to take into account a costs-benefits analysis, particularly if the damages ordered (if any) are small.

I hope my answer was useful and look forward to your rating, which is essential to my activity.


Dr I L Vlad

EULawyer and other European Law Specialists are ready to help you
Customer: replied 9 months ago.
Thank you for your answer.The following has been in the LOI which is the only document signed by both parties:- In the event of dispute regarding any aspect of this LOI the senior management of (Qatari company) and (English company) shall agree to meet to arrange for amicable settlement. In the event such matter is not resolved within fourteen (14) days, either Party may refer any dispute between the Parties to an ordinary court in London having proper jurisdiction in the disputed matter.- This LOI shall be governed by the laws of England, without prejudice to her conflict of law provisions.Taking the above into consideration, do they have any legal stand to sue us at a Qatar based court?

Dear Customer,

Thank you for your rating and the bonus! It was a great idea to send over the LOI provisions. This is where the drafting of such documents becomes essential. So, from my interpretation of it:

1. There can be a case for a claim for damages arising out of the breakup of negotiations, because the LOI provides for more than a "good faith" negotiation, and actually mentions the possibility of going to court; but

2. On the other hand, both English law and the jurisdiction of London courts are expressly provided for. Under this circumstance, there is no jurisdiction of Qatari courts (because such choice of court agreement in commercial matters are recognized everywhere most of the time), and even if they would accept the claim, there would be little chance of their decision being recognized by English courts, given their clear exclusive jurisdiction.


Dr I L Vlad

Customer: replied 9 months ago.
Thank you!

Thank you very much as well. I hope you will not need my services, but if you do, I will be very happy to help again!

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