What happens if, during a business negotiation, the parties have made a difficult decision on the ground a day later «punt»? Instead of finalizing the terms of an important topic, they simply promise to reach an agreement «by mutual agreement» in the future. Can one party, as soon as that day comes, «force» the other to reach an agreement? An agreement that must be reached should not be confused with a negotiation agreement, because even if the former is not applicable, the latter can sometimes be. The case of Copeland v. Baskin Robbins, U.S.A. is an example in principle, even if not in fact (because the case was lost because of an unrelated issue). The Michigan Court of Appeals ruled on a similar case and found that the «consent agreement» was not applicable in that case. The court ruled that a «binding agreement for the parties» must contain all the essential conditions contained in the final agreement signed. If there is no essential term, for example. B the actual buyback process, or other essential issues are dealt with, but remain unresolved, the agreement is not applicable.
In short, the agreement must itself be an enforceable expression of the parties` future agreement. however, the original contract is incomplete because essential elements governing the contractual relationship have not been settled or agreed upon; or the contract is too general or uncertain to be valid in itself and depends on the conclusion of a formal contract; or the understanding or intent of the parties, even if there is no uncertainty as to the terms of their agreement, that their legal obligations are deferred until a formal contract has been approved and executed, the initial or provisional agreement cannot constitute an enforceable contract. In other words, in such circumstances, the «clearance contract» is not a contract at all. The execution of the proposed form document is not only conceived as a solemn protocol or a monument to an already comprehensive and binding contract, but it is essential to the drafting of the contract itself. (Bawitko Investments Ltd. v. Kernels Popcorn Ltd., 1991 CanLII 2734 page 12-13.) Let us take this example: two shareholders enter into a written agreement with a third, founding shareholder. The agreement stipulates that the three shareholders «will develop a succession plan acceptable to both parties,» which will come into effect no later than a given date. The succession plan provides one of two options for the two new shareholders to buy out the founding shareholder. The Commercial Court followed the applicant`s argument that the parties wanted to enter into a binding contract and therefore had to attempt to implement the option agreement.