Potential buyers of a property were shocked when shortly after the successful completion of the prolong negotiations between the parties, the sellers informed them of their withdrawal from the negotiations and immediately thereafter sold the property to a third party which they have negotiated with while negotiating with the potential buyers. As a justification for their conduct the Sellers cited a note stipulated at the top of the pages of the drafts exchanged by the parties.
The Court rejected the potential buyers' contention due to the parties' agreement to the framework terms. In negotiations to conclude a contract, the parties must act in good faith. This obligation does not out rightfully preclude the option of conducting additional negotiations in parallel, provided that the other party is informed. When the draft contract includes a provision stipulating that in the absence of its execution, the agreement will not be finalized, it cannot be contended that the parties had a contractual agreement to form binding contractual obligation, even if they have agreed to all the relevant details necessary for the conclusion of a binding contract. Here, the framework conditions that were included in the title of each page of all of the drafts exchanged between the parties, included the parties' consent to conduct negotiations in parallel and a clear stipulation that contractual agreement would be expressed only by the execution of a final and binding agreement. Hence, especially given that these are experienced parties represented by lawyers, the sellers were entitled to conduct negotiations in parallel and withdraw from the negotiations with the potential buyers, despite the advanced stage in the negotiations that the parties had reached.