Contracting in commercial transactions can be an expensive and complex process, with several phases and actors, as well as considerable investments in know-how and information. In the case of complex purchases, leases, business purchases or leasing transactions, to name but a few types, it is virtually impossible for the parties to enter into a fully agreed and binding contract in a single meeting or over a very short period of time. Negotiations on these transactions are generally sequenticized, with a set of problems at each stage and by many agents with different skills. As part of their negotiations, parties often enter into upstream agreements, often referred to as declarations of intent, agreements in principle, letters of commitment, declarations of intent or appointment sheets. These agreements reflect the agreement reached so far by the parties on some or all of the essential provisions of the underlying transaction, but they contemplate and, to some extent, also govern the remaining negotiations between the parties. Interim agreements should therefore be considered as basic bargaining rules that may include obligations of confidentiality, disclosure and exclusivity. It is significant that these agreements can also create explicit or implied legal obligations in good faith. The invocation of good faith (or similar standard) calls on the court to review the parties` negotiations, especially if they collapse. With regard to the regulation of international trade agreements, the 2016 principles of UNIDROIT for International Trade Agreements (ICPS) are essentially included, as several sections of the ICP could be relevant in the case of interim agreements. z.B.: Art.

2.1.1 (art. 2.1.2-2.1.12. Offer and reception), art. 2.1.13 (depending on agreement on specific issues or in a specific form), art. 2.1.14 (contract with terms deliberately left open), art. 2.1.16 (confidentiality obligation). This presentation focuses on Article 2.1.15 (Negotiations in Bad Faith), as it explicitly refers to the possibility for international parties to enter into a pre-agreement and expressly commit to negotiating in good faith the conclusion of the final contract. Interim agreements – repeatedly called declarations of intent, declarations of intent, commitment sheets, letters of commitment or agreements in principle – are common in complex transactions. They document an incomplete set of conditions on which the parties have agreed and are waiting to continue negotiations on the other provisions. They often create legal obligations, including the duty to negotiate in good faith. This obligation has been the subject of a considerable number of judicial opinions in recent decades, but it remains considered a confusing and unpredictable issue in contract law. The analysis of the case law obstructs the analysis of the case law because it has focused on a single purpose of this conscientious mission: the protection of the confidence investment of the parties in the negotiation process.

This document broadens the analysis by introducing several objectives that the parties can achieve by imposing legal obligations on their negotiation process and shifting the focus on what the courts have identified as a necessary feature of the duty to negotiate in good faith: the expectation of some fidelity to the agreed terms set out in the interim agreement. The ease with which the parties can deviate from these conditions in their negotiations is the essence of the standard of good faith. Once the parties have sought and chosen their respective contractual partners, they need the incentives and flexibility to characterize and optimize the terms of their deal, while effectively limiting rewarding behaviour and assigning exogenous risks.