The Bottom Line
- A verbal “agreement” on price and assets does not create a binding contract if one party explicitly reserves the right to review the written agreement with their advisors. This is a crucial escape clause.
- Sending a draft contract that is significantly broader or different from what was discussed verbally can shatter trust and provide the other party with a legitimate reason to walk away from negotiations without liability.
- The freedom to terminate negotiations is a core principle in Dutch law. To claim damages for a broken-off deal, you must prove the other party created a justified reliance that a final agreement was certain—a very high standard to meet.
The Details
This case serves as a critical reminder for dealmakers about the perils of pre-contractual negotiations. The dispute arose after Hoek Group B.V. sought to acquire the “Cash & Carry” business of a sole proprietor. Following discussions, the parties had a phone call where they agreed on a price of €135,000 for specific assets: a cooling unit and a customer list (excluding one major client). Hoek Group believed this constituted a binding deal. The Court of Appeal, however, sided with the seller, noting a critical detail: during that very phone call, the seller had stated he would need to review the written contract with his accountant and lawyer. The court ruled that this reservation made it unreasonable for Hoek Group to believe a final, binding agreement had been formed.
The situation deteriorated when Hoek Group formalized the discussion. Its financial controller sent an email with a draft contract, which was described in the email body as merely an “intentieovereenkomst” (letter of intent). More damagingly, the draft itself did not reflect the verbal discussion. Instead of just the specified assets, the document proposed the sale of the entire business, including all tangible assets, rights, obligations, and contractual relationships. The court identified this as a major discrepancy. The seller immediately protested and, when Hoek Group’s representatives showed up at his office the next day against his wishes, he reiterated his refusal to sign anything without his lawyer’s approval before ultimately terminating the talks due to a “loss of trust.”
The court then addressed whether the seller had unlawfully terminated the negotiations. Under established Dutch case law (CBB/JPO), parties are free to break off talks unless it would be “unacceptable” based on the other party’s justified reliance that an agreement would be concluded. Here, the court found the seller’s actions entirely justified. Far from creating reliance, the seller had consistently expressed the need for advisor review. It was Hoek Group’s actions—sending a misaligned draft and applying pressure—that reasonably caused the breakdown in trust. The seller was therefore free to walk away and later sell the assets to a third party, even at a higher price.
Source
Gerechtshof Arnhem-Leeuwarden
