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Negotiating is One Thing, But Completing a Binding Contract is Quite Another

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Commercial negotiations may proceed for many months and involve any number of meetings, messages and phone calls. However, as a High Court ruling showed, the question of whether a binding contract has been completed very often hinges on whether a signature appears on a dotted line.

Over an extended period, a pharmaceutical company negotiated with a supplier, with a view to being supplied with a muscle relaxant drug used in the treatment of multiple sclerosis. The company asserted that those negotiations resulted in a legally binding agreement and launched proceedings after the supplier entered into a distribution deal in respect of the drug with one of its competitors.

Dismissing the claim, however, the Court found that the negotiations had proceeded throughout on a 'subject to contract' basis. Offers had been made and accepted, but it was understood that no binding contract would come into existence until a formal addendum had been agreed and signed by both parties. Such an addendum had been reduced to writing, but the supplier never signed it.

The contents of this article are intended for general information purposes only and shall not be deemed to be, or constitute legal advice. We cannot accept responsibility for any loss as a result of acts or omissions taken in respect of this article.

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