Walford v Miles [1992] 2 AC 128

Facts

• Walford v Miles was decided by the House of Lords, focusing on the enforceability of pre-contractual agreements in English contract law.
• The case distinguished between lock-out agreements (exclusivity not to negotiate with others for a fixed period) and lock-in agreements (agreements to negotiate in good faith).
• The dispute arose over whether the sellers' promise not to negotiate with third parties, and agreement to negotiate in good faith with the claimant, were legally binding.
• Referenced in the case was Pitt v PHH Asset Management Ltd, which further discussed these pre-contractual forms.

Issues

1. Whether a lock-out agreement—an undertaking by one party not to negotiate with third parties for a specified period—is enforceable under English law.
2. Whether a lock-in agreement—an obligation to negotiate in good faith—is sufficiently certain to be legally binding.
3. What requirements (e.g., clarity of duration, consideration) must be present for such agreements to be enforceable.

Decision

• The House of Lords held that lock-out agreements are enforceable if they provide for a clear and finite period of exclusivity.
• The court found that lock-in agreements to negotiate in good faith are generally too uncertain to be legally binding under English law.
• The judgment affirmed that the adversarial nature of negotiations makes it inappropriate to impose enforceable obligations to negotiate in good faith.
• The court highlighted the requirement for a lock-out agreement to include a specific termination date to avoid being void for uncertainty.
• Consideration is necessary for a lock-out agreement to be enforceable, as discussed in the subsequent case Pitt v PHH Asset Management Ltd.

Legal Principles

• Lock-out agreements constitute negative obligations not to negotiate with third parties and may be enforceable if clearly limited in duration and supported by consideration.
• Lock-in agreements, or agreements to negotiate in good faith, generally lack the certainty required for contractual enforceability.
• English contract law prioritises freedom of contract and recognises the adversarial nature of negotiations, allowing parties to withdraw at any time unless otherwise contractually restricted.
• For any binding pre-contractual agreement, clarity, precision, and consideration must be present.

Conclusion

Walford v Miles established a critical distinction in English law: lock-out agreements limited by time and supported by consideration may be enforceable, but agreements to negotiate in good faith are too uncertain to have binding effect. The decision affirms the principles of contractual freedom, adversarial negotiation, and the necessity of certainty for contractual enforceability.