Also known as:preliminary negotiation · pre-contractual negotiations
Written by attorneys · grounded in primary & secondary sources — see below
A manifestation of willingness to enter into a bargain that is not an offer because the recipient knows or has reason to know the maker does not intend to conclude a bargain until making a further manifestation of assent. Circumstances such as an express statement that no obligation arises until a writing is executed or the absence of agreement on essential terms show that the communications remain preliminary.
Sources & Authorities
How it applies
Common Examples
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Email Exchange With Later Writing Planned
CodeForge LLC and MetroHaul Corp exchanged detailed emails agreeing on every feature, price, and delivery milestone for a fleet-tracking platform. Each message referred to the terms as agreed and noted that lawyers would later draft a formal master services agreement. When CodeForge later refused to proceed, the court treated the emails as forming a binding contract rather than preliminary negotiations because the parties had manifested assent to all essential terms without conditioning obligation on the future writing.
Nonbinding Lease Proposal Label
Harborfront Properties LLC and BistroCo Inc. signed a detailed letter labeled Nonbinding Lease Proposal that set rent, term, build-out allowance, and move-in date. BistroCo immediately hired architects and began design work in reliance. When Harborfront solicited higher offers, the court held the letter did not constitute a binding lease because the nonbinding label and incomplete terms showed BistroCo had reason to know the arrangement remained preliminary negotiations.
Select any source to read its text and confirm it supports the definition.
Restatements
Casebooks
Hornbooks
Course Outlines
Study Supplements
Ranch Sale With Unwritten Option Terms
Grantors and grantees executed escrow instructions and a deed for ranch property that expressly reserved a repurchase option. The grantors later claimed an unwritten understanding that the option was personal and nonassignable. The court refused to enforce the claimed restriction because the preliminary negotiations had not produced a final written memorial containing that term, leaving the parties unbound on the additional condition.
Masterson v. Sine68 Cal. 2d 222, 436 P.2d 561 (1968)
Common questions
Frequently Asked
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When do communications cross from preliminary negotiations into a binding contract?+
Communications become a binding contract once the parties manifest assent to all essential terms without conditioning obligation on a later writing or further assent. Courts examine whether either party knew or had reason to know the other regarded the deal as incomplete.
Supporting sources
Does labeling a document nonbinding automatically prevent contract formation?+
A nonbinding label is relevant evidence of intent but is not dispositive. If the parties agree on all essential terms and one side acts in reliance, a court may still find a contract despite the label.
Supporting sources
How does the absence of a formal writing affect an otherwise complete agreement?+
The absence of a formal writing does not prevent contract formation when the parties have already manifested assent to all essential terms. The later writing is treated as a memorial rather than a condition precedent to obligation.
Supporting sources
What role does reliance play in distinguishing preliminary negotiations from a contract?+
Reliance such as hiring professionals or advertising the deal supplies objective evidence that at least one party believed a bargain had been struck. Such conduct supports finding mutual assent rather than mere preliminary negotiations.
Supporting sources
88 F. Supp. 2d 116 (1999)Contracts
…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…