In Star Finance – Property – Anor vs Nigerian Deposit Insurance Corporation, the Nigerian Court of Appeal stated: „A letter of intent can be nothing more than a document containing the preliminary understanding of the parties willing to enter into a contract or agreement based later on these conditions in this document.“ An agreement is an agreement that you make before the final contract. It is a great way to understand and formalize the negotiations. On the Walford vs Miles issue, the House of Lords said that a good faith agreement on the negotiations was not applicable. The Tribunal considers that such an agreement is unenforceable for two reasons: the concept of good faith is inherently contrary to the contradictory position of the parties in the negotiations and that a duty to negotiate in good faith is not feasible in practice. 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.) The applicant, an oil operator, entered into an option contract with the defendant, a shipbuilder.
The agreement gave the applicant three options, each for an order for four tankers. It provided that, in the event of an option exercised, delivery dates between the parties would be „agreed upon by mutual agreement,“ but the defendant „will do its best to have a delivery“ in 2016 for Option 1 and 2017 for The Two and Three Tankers. It also provided for the parties to enter into shipbuilding contracts within 10 days of the exercise of an option. The parties and their subsidiaries have also entered into other agreements, including four shipbuilding contracts that each order a tanker. There are several important takeaways for anyone who wants to make sure their approval is enforceable in the future. It should therefore be recalled that, in the first appeal, the High Court held that the applicant had an enforceable right to counselling services during the initial four-year period, but that he was not entitled to do so for another period. The obligation on the parties to agree on the length of an additional period was not applicable, as it was an agreement that did not contain a „mechanism“ or „objective standard“ for the Tribunal to „conclude“ on the duration of the extension. In this article, which follows our earlier update of the case, we examine the effects of the recent Court of Appeal case of Morris/Swanton Care – Community Ltd (Morris),2 in which the applicant sought to avail himself of a contractual option to provide additional services for „such a long period, which reasonably must be agreed upon,“ as the basis for an action for damages.