Also known as: preliminary negotiations · pre-contractual negotiation
Written by attorneys · grounded in primary & secondary sources — see below
Communications exchanged by parties exploring a possible contract that fall short of manifesting mutual assent sufficient to form a binding agreement. The surrounding circumstances determine whether the parties regard the discussions as incomplete and intend no obligation until further assent or a writing occurs.
Select any source to read its text and confirm it supports the definition.
A regional auto dealers' cooperative ran a newspaper ad offering in-stock sedans for $18,000 with no exceptions. Taylor presented the ad and tendered payment at Metro Motors, but the dealer refused citing financing and model limits. Taylor sued for breach. The court held the ad was preliminary negotiation rather than an offer, so no contract formed when Taylor responded.
Omega Catering told Henry during a phone call that it could supply meals at $45 per person for events of fifty or more attendees and described menu and delivery options. Henry said the price sounded workable and began advertising the packages. Omega later stated the call was only preliminary and refused to honor any bookings. Henry sued for breach, but the court found the discussion remained preliminary negotiation because the parties had not assented to specific events or reduced terms to writing.
Grantors and grantees completed a ranch sale through escrow instructions after preliminary negotiations. The deed reserved an option to repurchase but said nothing about whether the option was personal and nonassignable. When the grantees attempted to assign the option, the grantors objected. The court treated the earlier talks as preliminary negotiation that did not supply an unwritten personal restriction on the written option.
Advertisements directed to the public are ordinarily preliminary negotiation even when they state a price and product. An ad becomes an offer only if its language and context show the advertiser intends to be bound without further negotiation upon the specified response. Courts examine whether customary sales conditions such as financing approval remain open.
An oral exchange remains preliminary negotiation when it lacks definiteness as to specific events, dates, or quantities and when one party later clarifies that no firm commitment was intended. The absence of a writing and the failure to identify particular transactions support the conclusion that the parties viewed the talk as incomplete.
…power as well as to the fact of its existence. It is on this ground that we must exclude invitations to deal or acts of mere preliminary negotiation, and acts evidently done in jest or without intent to create legal relations. An obvious joke, of course, would not give rise to a contract. On the other hand, if there is no indication…
…was carried out through a title company upon written escrow instructions executed by the respective parties after various preliminary negotiations
Preliminary negotiations may be considered to determine whether the parties intended a later writing to be the complete expression of their agreement. If the writing is integrated, earlier discussions that contradict or add to it are excluded unless they show the writing was not meant to be final.
Yes. A claim for intentional interference with prospective economic relations can succeed when a defendant disrupts a near-final relationship with a reasonable probability of forming a contract. The fact that the talks have not yet produced a binding agreement does not automatically bar the tort.