negotiating, who show an interest in purchasing the business. In these circumstances, assurances may be made by the vendor which encourage one of the potential purchasers to incur expense. Here, it is necessary to consider whether those assurances have contractual force. The classical response to this problem is that if there is no concluded agreement, no contractual obligations will arise. If tenets of good faith are invoked, it is possible to arrive at a different conclusion, although if all that has been said amounts to no more than an agreement to negotiate no binding obligation will exist. In Courtney and Fairbairn Ltd v Tolaini Bros (Hotels) Ltd, the respondents

doi:10.4324/9781843141518-92

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negotiating, who show an interest in purchasing the business. In these circumstances, assurances may be made by the vendor which encourage one of the potential purchasers to incur expense. Here, it is necessary to consider whether those assurances have contractual force. The classical response to this problem is that if there is no concluded agreement, no contractual obligations will arise. If tenets of good faith are invoked, it is possible to arrive at a different conclusion, although if all that has been said amounts to no more than an agreement to negotiate no binding obligation will exist. In Courtney and Fairbairn Ltd v Tolaini Bros (Hotels) Ltd, the respondents

ABSTRACT

Lord Denning MR: After the meeting, on 10 April 1969, Mr Courtney wrote to Mr Tolaini this letter: ‘Re: Thatched Barn Hotel ... I am now in a position to introduce you to those who: (a) are interested in your proposals; (b) have access to the necessary finance ... I think I should mention, at this point, that my commercial interest in this matter is that of a Building Contractor. I am interested in it due to the fact that Mr Sacks, whom I have known for some years, is aware that I work for a number of large investing and development concerns, and thought it possible that I might be in a position to be of service to you. You will understand, therefore, that in addition to making myself useful to you, my objective is to build the three projects mentioned, namely, the Motel, the Filling Station, and the future Hotel, or other development, on the “Green Belt” area of your site. [Then follow these important words:] Accordingly, I would be very happy to know that, if my discussions and arrangements with interested parties lead to an introductory meeting, which in turn leads to a financial arrangement acceptable to both parties you will be prepared to instruct your Quantity Surveyor to negotiate fair and reasonable contract sums in respect of each of the three projects as they arise. (These would, incidentally be based upon agreed estimates of the net cost of work and general overheads with a margin for profit of 5%) which, I am sure you will agree, is indeed, reasonable.’