The first negotiation phase

When companies enter into negotiations with each other, a certain relationship arises between them almost immediately, long before the final contract comes into view. This so-called pre-contractual relationship is governed by the requirements of reasonableness and fairness. This means that the parties must take each other’s interests into account as early as the negotiation stage. As the intended agreement takes on more concrete forms and the justified expectation arises that this agreement will actually come about, the chances increase that parties will not be free to simply walk away from the negotiating table.

Breaking off negotiations at an advanced stage

If a party breaks off negotiations at an advanced stage, the aggrieved negotiating partner can under Dutch law, under certain circumstances, successfully claim compensation. This may involve compensation for the costs of advisers, but also, for example, for investments that the aggrieved party has made in the meantime in the legitimate expectation that the deal would ultimately be struck. There is also a chance that the party who breaks off negotiations must compensate the disappointed party for lost profit. This is the profit that the disappointed negotiating party would have generated if the deal had simply been concluded (and fulfilled).

If you want to keep your hands free to break off negotiations at any time, you can achieve this by making clear agreements with your negotiating partner beforehand. This might include making reservations, such as a financing reservation, the reservation of approval by the shareholders meeting or the reservation that only a signed agreement in which all the specified parts of the transaction have been addressed is binding on the parties.