Many agreements have obligations for other parties to enter into another agreement in the future, the terms of which are not always secure at this stage. In January 2016, the Court of Appeal again questioned the implementation of such an agreement. The judgment confirms that agreements may be binding if the absence of details for contract work is not sufficiently important that the object is not easily identifiable and the parties intend to create legal relations despite the lack of security. The idea that an agreement is a valid contract may be supported by some, but the fact is that, in the eyes of the law, consent to future conditions that are not secure is not sufficient to enter into a legally enforceable agreement. Therefore, an agreement that can be reached remains an unenforceable agreement that only implies the link between two parties and a future agreement, but does not guarantee it. Now imagine that the promised succession plan would never be developed. The only letter signed is “the agreement to be agreed at a later date.” (While such agreements may expressly provide that they are non-binding, there is no such provision. If the two new shareholders sue the founding shareholder for not accepting a written plan, can they win the lawsuit? Phytelligence also argued that the extrinsic evidence supported his position under several different theories. Without a clear conclusion that, in these circumstances, extrinsic evidence can be relied upon, the Federal Circuit reviewed the evidence put forward by Phytelligence and concluded that it did not support the conclusion that Section 4 created an enforceable contractual obligation for WSU to grant a licence to sell WA 38 apples to Phytelligence.
Earlier this month, the D.C. Court of Appeals highlighted the difference between enforceable contracts and simple negotiation. 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.) In Phytelligence, Inc.
v. Washington State University, the Federal Circuit found that the contractual terms at issue constituted an “unenforceable agreement” that did not confer the license fees at issue. Although this decision is adopted under state law, it highlights the possible non-applicability of option clauses that do not set sufficient conditions for the option that can be exercised. The parties are often under pressure to reach an agreement quickly and can therefore use a later agreement to “achieve the agreement”. Morris illustrates the risks associated with this approach and how saving time in development can lead to costly legal disputes that can be extremely troublesome for a company, especially if the party wants to rely on the concept in question. 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.