Negotiation and the law of contract – multivalency or incoherence?

Abstract

Negotiation features in Contract Law in numerous guises. (1) Courts recognise that negotiation may precede agreement (2) Courts will enforce agreements made after a negotiation process where parties intended to enter into legally binding arrangements (3) Courts decline to construe the contract by interrogation of the negotiations which led up to the point of agreement (4) A Court may create imaginary negotiation evidence, gleaning this from a Court simulated negotiation between hypothetical parties to the actual agreement (5) In the event of a breach of contract, a party may establish that the breaching party had actual knowledge of a state of affairs that might be a not improbable result of that breach. That actual knowledge will almost certainly have been created or transferred during negotiations. In this note, I argue that the principles of construction at 3 and 5 above are manifestly mutually incompatible. The logic of my argument is that reconsideration of the exclusionary rule is merited, particularly in the light of multiple exceptions and given the fact that Judges routinely deal with evidence of negotiations. As the actual knowledge rule is unexceptionable and the exclusionary rule highly questionable, coherence can be brought to the law relatively easily.