ABSTRACT
Preliminary negotiations in which a binding contract is imputed, and formal preliminary agreements, which may create a binding contract of undetermined scope, have special prominence in the corporate acquisition context. Case law in this area of preliminary dealings is arguably confused and unsatisfying. In recent years, contract scholars (including M&A scholars) have theorized about the purpose of such preliminary dealings primarily in the context of formal preliminary agreements, but have also considered the role of informal negotiations and non-binding agreements in contract creation. Notwithstanding differences, these scholarly analyses have uniformly held that common law principles (if applied correctly) provide a coherent approach to preliminary dealing conduct. In contrast to this approach to preliminary dealings, this paper argues that, in the corporate acquisition context, preliminary dealings should be addressed under a different regime of formal contracting standards. The existing common law regime protects the integrity of preliminary dealing conduct (both formal and informal) at the risk of mistakenly imposing contract obligations on an unsuspecting party. In the acquisition context, however, this approach fails to minimize efficiently the costs arising from the mistaken imposition of contractual obligations …
Franco, Joseph A, Contract Realism and Formalism in Preliminary Acquisition Agreements and Negotiations (May 2, 2024), Suffolk University Law School Research Paper No 24-4; Forthcoming, Columbia Business Law Review, 2024 no 1.
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