Walford v Miles [1992]

Walford v Miles [1992] 2 AC 128 addressed the enforceability of lock-out and lock-in agreements within the context of negotiations for the sale and purchase of a company. The ruling established that lock-out agreements, which prohibit negotiation with others, are enforceable when a specified end date is present. Conversely, lock-in agreements, committing parties to negotiate in good faith, are generally considered too uncertain to be enforceable under English contract law.

The specific facts involved negotiations between the claimant and the defendant for the sale of the defendant's company. The defendant initially agreed to a lock-out agreement, promising not to negotiate with third parties or explore alternative options. However, the defendant later sold the company to a third party, leading the claimant to bring a claim based on the breach of the lock-out agreement and an implied lock-in agreement to 'continue to negotiate in good faith.'

The House of Lords dismissed the claim, highlighting that the lock-out agreement was void for uncertainty due to the absence of a specified end date. Lord Ackner emphasised that lock-in agreements are typically unenforceable as they contradict the adversarial nature of negotiations, and parties must be allowed to withdraw to potentially secure better terms. Imposing a duty to negotiate in good faith was deemed challenging, given the difficulty in determining when a party is entitled to withdraw.

It was pointed out that the lock-out agreement lacked a specified end date, rendering it too uncertain. Dissenting views suggested that the defendant should refrain from negotiating with other parties for a reasonable time until it becomes evident that negotiations in good faith are no longer possible. The case highlights the cautious approach in English contract law regarding the enforceability of lock-in agreements, with an emphasis on parties' ability to act in their self-interest during negotiations.