Rosalina Investments Ltd & Anor v New Balance Athletic Shoes (UK) Ltd

On an application for strike-out or summary judgment, the court may decide whether negotiations produced a contract where the material communications are before it and the issue is suitable for determination without a trial. The court must assess the entire course of negotiations objectively, including communications after the alleged date of agreement, where the issue is whether any contract was formed. Repeated references to signature, countersignature, amendments and final execution may establish that the parties intended to be bound only on signature by all parties. A contractual obligation to negotiate in good faith must be sufficiently defined and time-limited. A clause imposing such an obligation only on the rights-holder cannot support a claim against the prospective sponsor for withdrawing before signature.

The claimants held rights connected with a professional footballer and had previously contracted with the defendant’s corporate group for promotional services. After the earlier agreement expired, the parties exchanged drafts concerning a renewal. The claimants contended that a contract had been concluded on 16 September 2016, despite the absence of signatures by all parties. They alternatively alleged breach of an obligation in the earlier agreement to negotiate renewal terms in good faith.

The defendant applied under Civil Procedure Rules 1998 r.3.4(2) and r.24.2 to strike out the claim or obtain summary judgment. The central questions were whether a contract had been formed and whether the alternative good-faith claim had a realistic prospect of success.

1. Summary determination. The communications between the parties were complete and undisputed as to their content. The court could therefore determine objectively whether a contract had been formed without a mini-trial. The entire course of negotiations had to be considered, rather than communications ending on the alleged contract date.
2. No concluded contract. The parties intended to be bound only when all parties had signed. The repeated references to signature, the order of signing, countersignature and execution, together with continuing negotiations over important amendments, were particularly significant. The claimant’s later refusal to provide further personal appearances until the agreement was signed also showed that negotiations remained incomplete. By January 2017, only Rosalina had signed; Rosalina UK and the defendant had not. No contract had therefore been concluded.
3. Good-faith negotiations. Clause 9.1 of the earlier agreement did not impose a reciprocal obligation on the defendant. Properly construed, it required the claimants, as holders of the rights being offered, to negotiate in good faith at the defendant’s request. Any obligation was also time-limited, ending on expiry of the earlier agreement or, at most, after the periods specified in the related provisions.
4. If clause 9.1 were construed as imposing a continuing mutual obligation, it would face the traditional objections identified in Walford v Miles [1992] 2 AC 128. A good-faith negotiation clause is enforceable only where those objections do not arise. This clause could not support a claim based on the defendant’s failure to sign before withdrawing from negotiations.
5. The claim for breach of the alleged concluded agreement and the alternative good-faith claim were each bound to fail. The claim was struck out and/or summary judgment was entered for the defendant. Costs were reserved for further argument.