NEGOTIATIONS: LIABILITY FOR A ‘CHANGE OF HEART’
Keywords:
negotiation, legal liablityAbstract
Often at an advanced stage of negotiation, a party reneges on its earlier assurance that it will enter into a contract with the other party. This may happen with the intention of manipulating the other party to agree to additional terms or because the project has become unviable for the concerned party. This article compares the adoption of doctrine of estoppel to the negotiation stage in two common law jurisdictions of England and Australia. In doing so, the article argues that a liability should be imposed on a party making assurances, during negotiation to the effect that a contract will eventuate between the parties, to promote ethical and cooperative negotiation behaviour. There is a growing agreement that cooperative negotiation strategies (win-win) rather than competitive negotiation strategies (win-lose) are more effective modes of dispute resolution. The article further suggests the adoption of the civil law doctrine of “culpa in contrahedo” which imposes a positive obligation of fair dealing during negotiations rather than invocation of a penalty only when a detriment has been caused to the other party as under the doctrine of estoppel.
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