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Farnsworth, E. Allan, Precontractual Liability and Preliminary Agreements: Fair Dealing and Failed Negotiations, 87 CLMLR 217

Farnsworth, E. Allan, Precontractual Liability and Preliminary Agreements: Fair Dealing and Failed Negotiations, 87 CLMLR 217

87 CLMLR 217

87 Colum. L. Rev. 217

Columbia Law Review

March, 1987



E. Allan Farnswortha1

Copyright (c) 1987 by the Directors of The Columbia Law Review Association, Inc.; E. Allan Farnsworth




Knapp offers a more fully developed standard of fair dealing in negotiation, one under which “neither can withdraw for an ‘unjustified’ reason, and yet ... neither will be compelled to perform if—after good faith bargaining—actual agreement cannot be reached.” Bad faith bargaining may consist of “an insistence on terms so clearly unreasonable that they could not have been advanced with any expectation of acceptance, coupled with some demonstrable advantage to be gained by ... avoiding the contemplated transaction.”221


a1Alfred McCormack Professor of Law, Columbia University. B.S.1948, University of Michigan; M.A.1949, Yale University; J.D.1952, Columbia University. I am grateful for help from many quarters. Practicing lawyers include Arthur R. Aitkens, Louis M. Brown, Karen L. Farnsworth, James C. Freund, Bernard H. Goldstein, A. Sidney Holderness, J. Clark Kelso, Richard E. Keresey, Donald J. Rapson, and Michael A. Ross. Foreign colleagues include Massimo Bianca, Eugen Bucher, Ulrich Drobnig, Georges Durry, Marcus Lutter, Dieter Medicus, Denis Tallon, Pierre Tercier, and Michael Will. And my American colleagues include Bruce A. Ackerman, Richard M. Briffault, Charles B. Craver, Daniel A. Farber, Stephen B. Goldberg, Robert A. Hillman, Robert E. Hudec, Charles L. Knapp, Stewart Macaulay, Henry P. Monaghan, Arthur G. Murphey, Jr., Dough Rendleman, Maurice Rosenberg, Hans Smit, Robert S. Summers, and William F. Young. Research assistants were Jeffrey P. Trout and, on German Law, Frank Koerner. Remaining flaws in this Article are due to my failure to accept unquestioningly their advice.
221Knapp, supra note 2, at 685, 723. Iklé sets out four possible meanings of “good faith” in treaty negotiation: 1. To make it highly probably that agreement will be reached. This means concretely that a party has to lower its terms whenever the probability of reaching an agreement falls below the desired level........2. Not to maintain a position which one feels sure will preclude agreement.... According to a more stringent variant of this second criterion, a government should not make even initial proposals which it knows to be “unacceptable” to the opponent....3. To want an agreement of the type that is being negotiated and to be eager to have one's terms ac-cepted....4. To follow certain rules of accommodation [such as the rule that concessions must be reciprocated] while negotiating.F. Iklé, supra note 165, at 111-13 (emphasis in original)

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