An owner of a land plot negotiated its sale for about two months, but just before signing the agreement she withdraw because she discovered the existence of additional building rights for which she might pay a higher improvement levy than expected.
The Court rejected the purchaser’s claim to consider the last draft agreement as binding and enforce the seller to carry out the transaction. The turning point between the pre-contractual phase (negotiations) and the contractual (and binding) phase should be clear and unambiguous. A party to a negotiation may withdraw from it at any time, as long as it has not made up his mind to be bound by the contract, and this was done in good faith. A party who withdrew in good faith from the negotiation, however advanced it may be, cannot be forced to enter into an agreement that it is not interested in. Here, the parties were very close to signing a contract after conducting lengthy negotiations for about two months and even set a date for signing. The parties saw the signing of the agreement as substantial and not a purely formal act, inter alia, because on many drafts it was stated: "Draft for negotiation only. The draft will not be binding upon the parties until both parties sign the agreement." Therefore, in the absence of a signature, the parties did not reach the binding contractual stage. Because the seller only discovered the additional building rights at a late stage of the negotiations and because this is not a trivial issue, she was entitled to withdraw from it and one cannot force her to enter into an agreement against her will.